The Electric Car Scheme

The employer leases the car and the employee gives up an agreed amount of gross salary to use it. Income tax and National Insurance are calculated on the reduced salary, and the employee pays Benefit in Kind tax on the car. For fully electric cars the Benefit in Kind rate is low compared with petrol and diesel, which is what makes the arrangement attractive.

For most employees paying income tax it costs less than leasing the same car privately, because the payment comes out of gross pay and the Benefit in Kind rate on electric cars is low. Whether it is worth it for a given person depends on their tax band, mileage and how long they want the car, so we quote per person rather than in general terms.

The agreement usually covers the lease, insurance, servicing, maintenance, tyres and breakdown cover, so the employee has one predictable deduction rather than a set of separate bills. Charging is handled through The Charge Scheme.

Benefit in Kind is the tax an employee pays on a company car. HMRC sets the rate as a percentage of the car's list price, and rates for fully electric cars are set out in advance by government so employers and employees can plan. Electric cars are taxed at a much lower rate than petrol, diesel and most hybrids.

The car goes back at the end of the term unless the employee arranges something else. Employees can usually take a new car under a fresh agreement, and early termination protection covers agreed life events such as redundancy or long term sick leave.