UK Drivers Embrace Salary Sacrifice to Counter National Insurance Rise, Boosting EV Adoption
British drivers are increasingly exploring salary sacrifice schemes, primarily to offset the impact of scheduled increases in National Insurance contributions, which is simultaneously driving greater interest in electric vehicles (EVs).
From April 2025, the National Insurance rate is set to jump from 13.8 percent to 15 percent, with the earnings threshold for employee contributions dropping from £9,100 to £5,000. This is prompting both employees and their employers to seek strategies to minimize the financial impact.
As a result, salary sacrifice schemes—where employees pay for a car directly from their pre-tax wages—are gaining traction. These schemes can be a significant financial advantage to consumers.
Thom Groot, CEO of The Electric Car Scheme, noted a marked surge in interest following the recent budget announcement, commenting on the change. “Pretty much overnight after the Budget, we saw a big uptick in interest,” he explained. “Previously there were a lot of businesses who were looking at it and telling us, ‘This is interesting, but I’m really busy.’ But now the increase in employee National Insurance contributions has sparked a lot of those businesses into action because they’re being challenged on costs and asking, ‘How can we drive savings?’”
According to data from The Electric Car Scheme, the typical monthly contribution for an electric vehicle via salary sacrifice hovers around £600, potentially saving drivers approximately £90 in National Insurance contributions.
These salary schemes are not limited to new EVs; used electric models are also eligible. Groot pointed out that the second-hand EV market has become much more active. “What we’ve seen over the last year is the second-hand car market in EVs has become much more active, and we’re seeing a lot of take-up of second-hand EVs through salary sacrifice.”
However, it’s not all smooth sailing for EV drivers. The tax exemption for electric vehicles, which has been in place for nearly 15 years to boost their adoption, is set to expire at the start of the next financial year. New EV buyers will initially pay a £10 tax, followed by the standard flat rate of £195 in subsequent years. This shift underscores the evolving tax landscape for motorists as the government shifts its focus to the increasing number of EVs on UK roads.
