If you’re considering a salary sacrifice car – or you’re already driving one – you’ve probably heard rumblings about government changes to salary sacrifice schemes.
With the Autumn Budget 2025 introducing new rules, it’s natural to wonder: is my electric car scheme affected?
The short answer? Car salary sacrifice schemes are completely unaffected by the recent budget changes. But let’s unpack what’s actually changing, what’s staying the same, and what it all means for anyone considering an electric vehicle through salary sacrifice in 2026.
What The Autumn Budget Actually Changed
In November 2025, Chancellor Rachel Reeves announced a cap on National Insurance relief for pension salary sacrifice schemes. From April 2029, employees will only receive NI relief on the first £2,000 of pension contributions made through salary sacrifice.
This was a significant change for pension savers – but here’s the crucial point: it only applies to pensions.
All other salary sacrifice schemes remain completely unchanged, including:
- Electric car schemes
- Cycle to Work schemes
- Childcare vouchers
- Technology schemes (laptops, phones)
- Any other non-pension benefits
The government explicitly confirmed that car salary sacrifice schemes continue exactly as before. No caps, no restrictions, no changes whatsoever.
What Is Changing For EV Salary Sacrifice?
The only change affecting electric car salary sacrifice in 2026 is the gradual increase in Benefit-in-Kind (BiK) tax rates – and this was announced years ago, so it’s not new news.
BiK rates for electric vehicles
- 2025/26: 3%
- 2026/27: 4% (from April 2026)
- 2027/28: 5%
- 2028/29: 7%
- 2029/30: 9%
These rates were confirmed back in 2022 and haven’t changed. They’re rising gradually to slowly reduce the tax advantage of company EVs, but they remain dramatically lower than petrol or diesel alternatives.
For context: A petrol car with moderate emissions faces BiK rates of 25-30%. Even at 9% in 2029/30, electric vehicles will still be less than a third of the tax burden of comparable petrol cars.
Why Are EVs Still The Best Salary Sacrifice Option?
Despite the BiK increase, electric vehicles remain by far the most tax-efficient choice for salary sacrifice schemes. Here’s why:
1. Still dramatically cheaper than alternatives: Even at 4% BiK in 2026/27, EVs are roughly one-sixth the BiK rate of a similar petrol car. The tax advantage is enormous and long-lasting.
2. All-inclusive packages: Salary sacrifice typically bundles insurance, maintenance, breakdown cover, and road tax into one monthly payment. This makes budgeting simple and removes unexpected costs.
3. Lower running costs: Electricity is far cheaper than petrol. Even with public charging, you’re spending significantly less on “fuel” over the year. While there’s talk of future road pricing for EVs, this is years away and would still cost less than petrol.
4. Exempt from workplace charging BIK: When you charge your EV at work, it’s completely tax-free. That’s free fuel for your commute.
5. No impact from pension changes: Unlike pension salary sacrifice, car schemes are untouched by the new £2,000 cap. You can salary sacrifice as much as you need to cover the vehicle cost.
What About Other Changes In 2026?
There are a couple of other minor changes worth knowing about, though neither fundamentally alters the attractiveness of EV salary sacrifice:
VED (road tax) changes
From April 2025, electric vehicles began paying standard Vehicle Excise Duty (around £195 per year). However, this is almost always included in your salary sacrifice package, so it’s already factored into your monthly cost. You won’t see this as an extra bill.
Expensive Car Supplement
Good news here – from April 2026, the threshold for EVs increases to £50,000 (up from £40,000 for other vehicles). This means if your EV costs between £40,000-£50,000, you won’t pay the supplement at all. Only EVs over £50,000 list price pay the additional £425 per year in VED for years 2-6 of ownership.
This change applies retrospectively to EVs registered from April 2025. Again, this is typically built into salary sacrifice packages, so it’s already accounted for.
National Minimum Wage protections
The National Living Wage increases to £12.71 per hour in April 2026. Salary sacrifice arrangements can never reduce your pay below this threshold, so some lower earners may find certain higher-priced vehicles unavailable. This isn’t new, but it’s worth remembering.
None of these changes fundamentally alters the proposition. EV salary sacrifice remains one of the most tax-efficient employee benefits available in the UK.
Other EV Changes To Be Aware Of
While these aren’t specific to 2026, there are a couple of other EV-related changes worth knowing about if you’re considering salary sacrifice:
London Congestion Charge
As of December 2025, electric vehicles are no longer exempt from London’s Congestion Charge. If you regularly drive into central London, you’ll now pay £18 per day like other vehicles. However, EV drivers can reduce this to £13.50 per day by registering for Auto Pay. This doesn’t affect the salary sacrifice scheme itself, but it’s worth factoring into your total cost of ownership if you’re a London commuter.
Road pricing consultation
From April 2028, the government will introduce Electric Vehicle Excise Duty (EVED), charging EVs around 3p per mile. While this adds to running costs, 3p per mile remains significantly cheaper than current petrol costs and doesn’t affect the core tax advantages of salary sacrifice schemes.
Should You Wait Or Act Now?
Here’s the thing: BiK rates are only going one direction – up. If you’re considering an EV through salary sacrifice, starting sooner rather than later locks in lower rates for the duration of your lease.
If you start a three-year lease in early 2026 at 4% BiK, you’ll average lower BiK across the contract than if you wait until 2027 or 2028. The sooner you act, the more you save.
The fundamentals that made EV salary sacrifice attractive in 2025 remain just as compelling in 2026 – and will continue to do so for years to come.