An electric vehicle salary sacrifice scheme lets an employee pay for an electric car each month using their gross salary – that’s before tax and other contributions are deducted. It’s the same as other salary sacrifice schemes, such as childcare, cycle to work schemes or pension contributions.
Unlike some other benefits that you might take through salary sacrifice, an electric vehicle isn’t taxed based on the salary that you give up: instead you pay tax on the value of the benefit in kind (BIK) tax. BIK is the value of the benefit you receive – in this case, a car. It’s what has helped make salary sacrifice the cheapest way to own an electric car. For battery-electric cars, BIK tax is 1% for 2021/22, and 2% for 2022/23.