What does the Autumn Statement mean for EV salary sacrifice?
The Autumn Statement was announced by Chancellor Jeremy Hunt on the 17th November, setting out his new budget for the Government’s plan for the economy. The budget sets out the planned spending and revenue gathering for the next few years to support the UK’s economic growth.
The Autumn Statement brought great news for electric car drivers who’ll continue to benefit from generous tax incentives for driving low emission vehicles for the foreseeable future.
There are some changes that impact electric car drivers who have a car under a salary sacrifice scheme. Let’s dive into what the budget means for these drivers.
Changes to Benefit-in-Kind rates (BiK)
Benefit-in-Kind (BiK), also known as ‘company car tax’ is the tax that you pay if you take a car under a salary sacrifice scheme through your employer. You get taxed a small amount for the benefit of having the car, whilst making other savings on Income Tax and National Insurance.
Benefit in Kind is increasing for all cars from 2025, apart from those with the highest emissions, because they’re already paying the top level BiK rate.
The BiK rate has been set at 2% for electric car drivers until 2025. After this it’ll increase just 1% per year until 2028. This means it’ll only increase to 3% in April 2025, then to 4% in 2026, and then 5% in 2027 staying there until 2028.
This small incremental increase for electric cars is still the lowest amount of BiK that you can pay for a salary sacrifice car. Even if you chose a green hybrid car under a salary sacrifice scheme you’d still end up paying more than 20% in annual BiK rates by 2028. The BiK rate staying low for EVs gives drivers great savings and incentives to switch to electric.
Electric cars will pay road tax from 2025
For the first time, electric car drivers will need to pay road tax (also known as Vehicle Excise Duty, or VED). EVs have been exempt from paying road tax, and they still will be until 2025. From 1st April 2025 it’ll be a requirement to pay road tax like all other cars.
If you’re an electric car driver you don’t have any road tax to pay until 2025. You still have to renew your registration, but it’s set at a rate of £0 until the change comes into effect.
How much you’ll pay after 2025 in electric car road tax depends on the value of your car. Here’s how it breaks down:
- EVs registered before the 1st April 2025 will have to pay road tax at the standard rate, which is currently £165 per year.
- EVs registered on or after the 1st April 2025 and valued at less than £40,000 will need to pay £10 for the first year, and the standard rate of £165 per year after that. From year 2, it’ll add less than £14 onto your monthly car running costs.
For EVs registered on or after the 1st April 2025 and valued at more than £40,000 it’s a little more expensive. You’ll pay £10 for the first year, then between year 2 and year 6 you’ll pay £520 a year for premium car tax. After year 6 it’ll drop back down to £165. This means that for 5 years it’ll add around £43 to your monthly car running costs, and after that you’ll drop back down to under £14 per month.
If you use our salary sacrifice scheme we’ll include this cost in your monthly payments straight from your salary, so there’s nothing for you to think about when it comes to Vehicle Excise Duty on your electric car.
Advisory fuel rates
Advisory fuel rates are set by the government to make sure that employers pay their team a standard rate on any business miles driven to cover fuel, maintenance and wear and tear of the vehicle.
The rate is increasing from 5p per mile for an electric vehicle to 8p per mile from 1st December 2022. This means that you’ll get more money back for any business miles driven, making switching to an electric car under a salary sacrifice scheme an even more attractive option. Because we cover most of the maintenance and running costs for you under our salary sacrifice scheme, these extra savings can go straight into your pocket!
Increases to National Minimum Wage and National Living Wage
The UK’s National Living Wage and National Minimum Wage are going up in April 2023, which is great news for workers of all ages. The hourly National Minimum Wage for 18-20 year olds is increasing by 66p, and 20-22 year olds will get an increase of £1. The National Living Wage for adults 23 and above will be going from £9.50 to £10.47 per hour.
This matters for salary sacrifice because any benefits provided by employers need to be compliant with the minimum hourly rates. Benefits like salary sacrifice can’t take a worker's hourly rate below the new minimum wage after the contribution has been deducted from their salary.
Additional rate Income Tax threshold reduced
The highest earners currently pay 45% of tax on any amount they earn above £150,000 a year. With the new budget, this threshold has been reduced to £125,140. Any amount earned above the new threshold of £125,140 is subject to the 45% additional rate tax. These rates are frozen until 2028.
The good news for EV salary sacrifice drivers in this tax bracket is that there are even greater savings to be made on your brand new electric car. Tax that you’d normally pay out of your salary straight to HMRC can now go towards paying for your shiny new EV, reducing your overall take home salary and reducing your Income Tax and National Insurance Contributions.
What does this mean for me?
If you’ve already got an electric car with salary sacrifice, it’s not going to end up costing you much more from 2025, with the recent budget changes. You’ve got a future-proofed electric vehicle that costs less to run than a petrol or diesel car.
If you’re thinking about getting a car under a salary sacrifice scheme, there’s never been a better time.
With savings to be made on road tax (VED), Benefit in Kind rates remaining low, more money to be recouped from business mileage and greater tax incentives for high earners, signing up to an EV salary sacrifice scheme is a no brainer. When you use our salary sacrifice scheme you also get access to a brand new car with a free home EV charger, servicing, and maintenance costs included.
Not only will you save money each month on your car using a tax efficient benefits scheme, you’ll save money in the long run on running costs, fuel costs, low emission zone charges and you’ll reduce your carbon footprint all in one go.