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Drivers of zero emission vehicles will benefit from the 0% rate for the tax year 2020 to 2021. This 0% rate also applies to:

  • company car drivers in pure electric vehicles registered prior to April 6, 2020; and
  • company cars registered after April 6, 2020, with emissions from 1-50g/km and which have an electric mile range of 130 miles or more.

The rates will increase to 1% in 2021/22 and 2% in 2022/23

For companies that wish to purchase rather than lease their cars, the purchase of new cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means you can deduct the full cost from your pre-tax profits.


More difficult - VAT on a new car can only be claimed if it is used only for business. The car must not be available for private use, and you must be able to show that it is not, for example it is specified in your employee’s contract.

What are the benefits of a salary sacrifice scheme for an employee?

Salary sacrifice is where your employee agrees to give up part of their pre-tax salary in exchange for a benefit from their employer. A salary sacrifice scheme will allow the employee to drive a fully electric company car, by forgoing a portion of their gross salary. The amount will be deducted before tax and National Insurance contributions are applied.

What are the benefits of a salary sacrifice scheme for an employer?

A salary sacrifice scheme will allow the employers to offer employees a new car at a lower cost with a tax-efficient payment method. Additionally, the company should also benefit from reduced National Insurance contribution payments.

Overall Benefits

For the Employer:

  • Deduction from profits of the cost of the Car if owned by the business
  • Increased employee engagement and retention
  • National Insurance contribution savings
  • Reduced fuel costs
  • No initial upfront costs – if leased
  • Employee interaction and engagement is covered by the leasing company
  • Salary sacrifice schemes complement existing employee benefits

Benefits for the Employee:

  • Access to a brand-new electric car
  • Significant National Insurance savings
  • No initial upfront costs
  • Flexible mileage and terms
  • Fixed cost motoring without unexpected bills or service costs
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