If you’re considering a salary sacrifice EV, you’ve probably heard that company car tax is going up in April 2027. The benefit-in-kind (BiK) rate for electric cars rises from 2% to 3%, which sounds small until you realise it means a 50% increase in your tax bill. The question everyone’s asking: should you rush into a scheme before the rates change, or is the panic overblown?
Let me walk you through what this actually means for your monthly take-home, because the real-world impact is more nuanced than the headlines suggest.
How the BiK Rate Affects Your Actual Costs
Company car tax works like this: you pay income tax and National Insurance on a percentage of your car’s list price. For EVs, that percentage is currently 2% of the P11D value (the list price including VAT and any factory-fitted options). In April 2027, it rises to 3%.
Let’s take a Tesla Model 3 Long Range with a P11D value of £50,990. At 2%, your taxable benefit is £1,019.80 per year. At 3%, it’s £1,529.70. That’s an extra £509.90 in taxable benefit.
But you don’t pay £509.90 more. You pay tax and National Insurance on that amount. If you’re a basic-rate taxpayer (20% income tax, 8% NI after the threshold), you’d pay an extra £142.77 per year, or about £12 per month. If you’re a higher-rate taxpayer (40% income tax, 2% NI), it’s £214.16 per year, or roughly £18 per month.
For a more expensive car like a Polestar 3 Long Range Dual Motor with a P11D of around £69,900, a higher-rate taxpayer would see their monthly cost increase by about £24.
The National Insurance Factor Everyone Forgets
Here’s what most articles miss: when your BiK increases, you don’t just pay more tax. You also pay more National Insurance, which means you get slightly less NI relief from your salary sacrifice arrangement.
With salary sacrifice, you avoid paying NI on the amount sacrificed from your gross salary. But you do pay NI on your BiK. When the BiK goes up, you’re paying NI on a larger benefit, which slightly reduces one of the key advantages of salary sacrifice schemes.
The impact varies by salary band because NI rates differ above and below the upper earnings limit (£50,270 for 2024/25). For most people, this adds another £3 to £7 per month to the increase, depending on their salary and the car’s value. It’s not enormous, but it’s real money that compounds over a three or four-year lease.
Should You Rush Into a Scheme Before April 2027?
This depends entirely on your timeline and what cars are available now versus later.
If you were planning to get a salary sacrifice EV in early 2027 anyway, pulling it forward by a few months could save you roughly £150 to £250 per year over a typical three-year lease, assuming you’re getting a mid-range EV like a Model 3 or Volkswagen ID.4. Multiply that by three years and you’re looking at £450 to £750 in total savings.
But here’s the catch: salary sacrifice deals are getting more competitive, and more affordable EVs are arriving throughout 2025 and 2026. The new Renault 5, updated MG4, and facelifted Hyundai Kona Electric all offer lower P11D values than many current options. A car with a £35,000 list price at 3% BiK could still cost you less overall than a £50,000 car at 2% BiK.
There’s also the question of lease pricing. If providers reduce monthly lease costs by even £20 to £30 to remain competitive, that could easily offset the BiK increase. And you’d have a newer model with potentially better range and technology.
What About Longer Leases?
Some providers offer four-year leases, and if you sign up before April 2027, you’d lock in the 2% rate for the entire lease period. For a £55,000 car, a higher-rate taxpayer would save roughly £200 per year, or £800 over four years, compared to taking the same lease at 3% BiK.
That’s meaningful money, but only if you’re genuinely ready to commit now. Salary sacrifice agreements usually require you to maintain the lease for the full term unless you have a qualifying life event like redundancy or long-term sick leave. Locking yourself into a four-year agreement to save £800 only makes sense if it’s the right car at the right time for you.
The Practical Takeaway
If you’re already in the market for a salary sacrifice EV and you’ve found a deal that works for your budget and driving needs, signing before April 2027 will save you a modest but tangible amount, particularly over a longer lease. For a typical three-year lease on a £50,000 EV, expect to save somewhere between £400 and £750 in total, depending on your tax band.
But if you’re on the fence, don’t let the rate increase push you into a hasty decision. The monthly impact is around £10 to £25 for most combinations of car and salary, and that could easily be offset by waiting for better lease deals, newer models, or a car that better suits your actual needs.
Whatever you decide, check the specific numbers with your salary sacrifice provider, as some schemes include insurance and maintenance in ways that affect the overall comparison. And remember that tax rates and thresholds can change, so verify current BiK rates and National Insurance bands with HMRC or your employer’s scheme administrator before committing.