As we edge closer to the end of the 2024/2025 tax year, and fast approach April 2025, when many of the changes announced in the Autumn Budget will take effect, we have written this blog post to share how these changes will impact Employers and Employees partaking in our EV Salary Sacrifice Scheme.
Employers
Employer National Insurance Contributions
One of the key announcements is that the rate of Employer National Insurance Contributions (NICs) will rise by 1.2 percentage points, bringing it to 15%.
Additionally, the per-employee threshold for employer National Insurance will decrease from £9,100 to £5,000 annually. These changes will come into effect on 6 April 2025.
Our EV Salary Sacrifice Scheme could lower your National Insurance Contributions.
Employees can save money by exchanging a portion of their annual salary for a car and added services before taxes, which reduces the tax and National Insurance they owe. This allows employees to access a brand new, fully maintained, and insured lease vehicle at a lower cost than they could otherwise achieve.
Employers will enjoy reduced National Insurance Contributions (NICs) and corporation tax relief, as the vehicle will be classified as a company car for tax purposes.
If your company joins our EV Salary Sacrifice Scheme and chooses to share the National Insurance savings with employees, you are likely to see an increase in Salary Sacrifice Savings.
National Minimum Wage
In the Autumn budget, it was confirmed The National Living Wage (NLW) will increase. As of April 2025, the National Minimum Wage will increase by 6.7% to the £12.21 an hour for over 25 year olds.
For those considering EV Salary Sacrifice, it is important to remember that if the amount sacrificed results in your salary falling below the National Living Wage limit, you will be unable to participate in the car scheme. Lease Electric advise you to discuss the EV Salary Sacrifice Scheme, with your Employer’s HR Team.
EV Salary Sacrifice Scheme FAQs
Benefit-in-Kind rate increase
As Salary Sacrificed Electric Vehicles (EVs) are classed as company cars for tax purposes, one of the key factors to consider is the Benefit-in-Kind (BiK) Tax.
Reeves has reaffirmed her dedication to supporting the green transition to electric vehicles, ensuring that the BiK rate remains low to encourage adoption.
Starting in April 2025, cars with zero CO2 emissions (fully electric vehicles) will see their BiK rate increase by 1% each year until 2028. Beginning in 2028, this rate will rise by 2 percentage points annually, reaching 9% by the 2029-2030 period.
| CO2 Emissions (g/km) |
Appropriate Percentage | |||||
|---|---|---|---|---|---|---|
| Tax Year | ||||||
| 2022-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | |
| 0 | 2% | 3% | 4% | 5% | 7% | 9% |
- For vehicles that emit between 1-50g of CO2 per kilometer, including hybrids, the BiK rates will also increase by 1% annually from April 2025. By 2028, the rate will reach 18% for the 2028-29 period, followed by 19% in 2029-30.
- For all other vehicle categories, rates will go up by 1 percentage point each year during 2028-29 and 2029-30, while the maximum AP will also increase by 1 percentage point annually, hitting 38% for 2028-2029 and 39% for 2029-2030.
For a detailed breakdown of BiK rates by year, please consult our BiK rate table.
Discover how these rates will affect you or your employees by clicking here.
The slight increase in the BiK rate has minimal impact on salary sacrifice, as even with small annual increases, it continues to be the most cost-effective way to drive an electric car.
Vehicle Excise Duty
Often known as 'car tax' or 'road tax,' Vehicle Excise Duty (VED) encompasses two main components: the First Year Rate (FYR) and the Standard Rate (SR).
Historically, electric car drivers have benefited from various tax incentives. However, starting from April 1st, 2025, electric vehicles will incur VED charges: a First Year Rate of £10, followed by an annual fee of £195 from the second year of registration onward, along with an Expensive Car Supplement of £410 per year for five years for cars priced over £40,000.
Chancellor Reeves has announced a freeze on the lowest First Year Rate for electric vehicles until the 2029/2030 period, while simultaneously doubling the rates for all other emissions categories beginning in 2025.
In summary, this means electric cars are set to become a more affordable choice and will achieve greater cost parity with petrol and diesel vehicles.
Find out more about Vehicle Excise Duty and the Expensive Car Supplement
The rates and allowances mentioned are based on the 2024 Autumn Budget from HM Treasury and are for information purposes only. Lease Electric recommends consulting your Financial Advisor or Accountant and seeking professional advice and guidance before making any decisions
Useful Links
Upcoming Car Tax Changes 2025/2026
HMRC Guidance - Vehicle tax for electric, zero or low emission vehicles