If you’re considering an electric car through a salary sacrifice scheme, you’ve probably heard about the 2027 tax changes. Benefit in Kind (BIK) rates for electric vehicles are going up from 2% to 3% in April 2027, then to 4% and 5% in the following years. The question I’m getting asked constantly is: should you jump in now or wait?
I’ve been through this decision myself, and I’ve spoken to dozens of drivers wrestling with the same dilemma. The short answer is that for most people, the 2027 changes shouldn’t put you off. But let’s look at what they actually mean for your monthly pay packet.
What’s Actually Changing in 2027
Right now, electric cars sit in the 2% BIK band. This is the rate your employer uses to calculate the taxable benefit of your company car. From April 2027, that rises to 3%, then 4% in 2028 and 5% in 2029, where it’s set to stay until at least 2030.
Compare this to petrol and diesel cars, which typically sit between 20% and 37% depending on emissions, and EVs remain extraordinarily tax efficient. The question is whether that 1% jump makes enough difference to change your plans.
What This Means in Real Money
Let’s work through a realistic example. Say you’re looking at a £45,000 electric car (think Volkswagen ID.4, Kia EV6, or my Skoda Enyaq) through a salary sacrifice scheme.
At the current 2% BIK rate, you’d pay tax on £900 per year (2% of £45,000). If you’re a basic rate taxpayer, that’s £180 in extra income tax annually, or £15 per month. Add National Insurance at 8% and you’re looking at roughly £22 per month total.
When the rate goes to 3% in April 2027, you’d pay tax on £1,350 instead. For the same basic rate taxpayer, that’s £270 in income tax (£22.50 monthly) plus NI contributions of around £9 monthly. Total monthly cost: roughly £31.50.
The difference? About £9.50 per month. Over a typical three or four year lease, we’re talking £340 to £450 extra across the entire contract.
Higher Rate Taxpayers
If you’re a higher rate taxpayer paying 40%, the numbers are larger but the principle holds. Your monthly BIK cost would go from roughly £38 to £57, a difference of about £19 per month. Still not huge compared to the total cost of running a car.
What Happens If You’re Already In a Contract
This is where it gets interesting. Your BIK rate isn’t locked in for the duration of your lease. When April 2027 arrives, everyone driving an electric company car will move to the new 3% rate, regardless of when they signed up.
In my experience, this catches people out. You might think getting a four year lease now locks you into 2% BIK for four years, but it doesn’t. You’ll pay 2% until April 2027, then 3%, then 4% in 2028 for the remainder of your contract.
The silver lining? There’s no advantage to waiting. You won’t get a better rate by holding off.
The Bigger Picture: Salary Sacrifice vs Personal Lease
The 2027 changes are small enough that they shouldn’t drive your decision. What matters more is whether a salary sacrifice scheme makes sense for you at all.
Through salary sacrifice, you’re typically paying the lease cost, insurance, servicing, and tyres from your gross salary before tax and National Insurance. For a basic rate taxpayer, every £100 of lease cost only reduces your take-home by roughly £68. For higher rate taxpayers, it’s even better at around £58.
When I switched to salary sacrifice in 2022, the savings compared to a personal lease were substantial. I’m paying about £420 monthly from gross salary for my Enyaq with everything included. To take home £420 after tax and NI to pay for a personal lease, I’d need to earn roughly £620. That’s a £200 monthly saving, or £2,400 per year.
Against those kinds of numbers, an extra £9.50 monthly from 2027 barely registers.
Reasons You Might Wait
The 2027 tax change isn’t a reason to delay, but there are legitimate reasons to hold off on a salary sacrifice EV.
First, if you’re planning to leave your job in the next year or so, salary sacrifice schemes typically require you to buy out the remaining contract or return the car. That can be expensive and complicated.
Second, if better models are coming soon that you really want, it might be worth waiting. We’re seeing new EVs with improved range and charging speeds launching regularly. The Renault Scenic E-Tech and various updated models from Hyundai and Kia are recent examples.
Third, and I’ve seen this catch people out, make sure you’ll have somewhere to charge. If you’re in a flat without dedicated parking and your workplace doesn’t offer charging, salary sacrifice might not be practical regardless of the tax benefits.
My Take: Don’t Let 2027 Hold You Back
I understand the instinct to wait when you hear taxes are going up. But we’re talking about BIK rates rising from extraordinarily good to slightly less extraordinarily good. Electric cars will remain by far the most tax efficient company car choice.
If a salary sacrifice scheme is available to you now, the car you want is available, and it fits your circumstances, the 2027 changes aren’t reason enough to delay. You’ll be paying the higher rate eventually anyway, and in the meantime you’re spending more on fuel and missing out on the salary sacrifice savings.
Run the numbers based on the specific cars and schemes available to you. Most salary sacrifice providers will give you a detailed breakdown showing exactly what comes out of your gross pay and what your take-home impact will be. Ask them to show you the figures for 2027 as well. When you see it in black and white, the decision usually becomes clearer.