12 March 2025
Driving Growth in Salary Sacrifice
As we approach April 2025, significant changes to National Insurance (NI) contributions are pushing more employers to consider offering salary sacrifice schemes, particularly those focused on electric vehicles (EVs).
The UK government’s decision to increase employers’ NI contributions from 13.8% to 15% from April, alongside a reduction in the threshold for NI contributions on workers’ earnings from £9,100 to £5,000, has made salary sacrifice schemes an even more attractive option for businesses.
How salary sacrifice helps employers and employees
Salary sacrifice allows employees to lease vehicles from their pre-tax salary, which results in savings on income tax and NI. For businesses, it lowers the employer’s overall NICs, making it a win-win situation for both employers and their staff.
Employers are increasingly looking to provide new and second-hand EVs to employees through salary sacrifice schemes, not only as an employee benefit but also as a way to reduce their financial liabilities. These schemes are particularly beneficial in light of the growing demand for sustainable transport options and the rising cost of living.
Why salary sacrifice schemes are gaining popularity
Interest in salary sacrifice schemes for EVs has surged, with inquiries from businesses jumping by 21% since the announcement of the NI increase in October 2024.
The rise in popularity of second-hand EVs is also playing a key role in making EVs more accessible, both financially and environmentally. As a result, many employees now expect their employers to help them commute sustainably, creating a demand for these types of benefits.
How Activa Can Help
At Activa, we offer a fully managed salary sacrifice car scheme where employees can select a brand-new car from a range of manufacturers, with full vehicle maintenance included. With a salary sacrifice scheme, employees lease a car for two to three years, paying via a portion of their gross salary. This results in tax savings and lower NI contributions. Employees will also be subject to Benefit in Kind (BIK) tax, but with low-emission cars, the savings can be substantial for both employees and employers.
Salary sacrifice schemes offer clear benefits, both in terms of financial savings and offering a valuable employee perk. As businesses continue to adapt to changing tax rules and employee demands for sustainable transport options, salary sacrifice for EVs is becoming an increasingly popular solution.
To learn more about how a salary sacrifice scheme can benefit your business and employees, visit Activa’s Salary Sacrifice Page.
