Businesses are piling into electric vehicle (EV) salary sacrifice schemes in a bid to beat Rachel Reeves’s National Insurance tax raid.
Car providers have reported a surge of interest from companies in setting up company car benefits following an announcement by Ms Reeves, the Chancellor, of an increase to employers’ National Insurance contributions (NICs).
The NICs changes – criticised as a “jobs tax” by business groups – will raise the levies companies pay on staff wages from 13.8pc to 15pc from April 1.
Thom Groot, the chief executive of The Electric Car Scheme, said many firms were now seeking to minimise the blow by signing up employees to EV salary sacrifice schemes. National Insurance is only charged on the total after any salary sacrifice contributions are made.
Mr Groot said: “Pretty much overnight after the Budget, we saw a big uptick in interest. Previously there were a lot of businesses who were looking at it and telling us, ‘This is interesting, but I’m really busy.’
“But now the increase in employee National Insurance contributions has sparked a lot of those businesses into action, because they’re being challenged on costs and asking, ‘How can we drive savings?’”
The Electric Car Scheme manages salary sacrifice schemes on behalf of a string of organisations including Holland & Barrett, Hitachi, Time Out, Tuffnells and Millwall Football Club.
The schemes see businesses lease electric cars on behalf of their employees, who then receive the vehicles as a benefit and pay for it out of their salaries – before tax is deducted.
Mr Groot said a typical monthly salary contribution tends to be around £600, meaning that employers could reduce their NICs by some £90 per employee, per month. If 100 people signed up at a company, that would translate into savings of £108,000 on their annual tax bill.
Mr Groot said inquiries to his company jumped by 20pc in the aftermath of the Budget, with car orders rising 22pc.
A source at another car leasing provider said they had seen a similar post-Budget jump in interest.
The increase comes as ministers are considering whether to relax government EV sales targets, which manufacturers have claimed are too tough.
Companies can make “considerable” NICs savings by offering EV salary sacrifice schemes, according to information published by accountancy giant BDO. However, some of this will be reduced by other changes to benefit-in-kind tax rules that are also coming into force.
From April 1, companies must pay a tax on the car equivalent to 3pc of its list price – up from 2pc previously – and this will rise by one extra percentage point per year until April 2028.
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