The benefit in kind (BIK) rate for electric company cars is set to rise from 2% to 3% in April 2027. If you’re considering an EV salary sacrifice scheme, that leaves you with a question: sign up now to lock in the lower rate, or wait eight months for potentially better lease deals and newer models?
The answer depends on your salary, the car you want, and whether you think waiting will actually save you money. Here’s how to work it out.
How BIK rates lock in when you sign
This is the critical bit: your BIK rate is set by the tax year in which your lease agreement starts, not when you take delivery. If you sign a four-year salary sacrifice lease in March 2027, you’ll pay 2% BIK for the entire four years, even though the rate rises to 3% the following month.
Sign in April 2027 or later, and you’ll pay 3% for the duration of your lease. That 1 percentage point difference applies to the car’s P11D value (its list price including options and VAT, minus the first year registration fee) every single year of your lease.
What the BIK jump actually costs you
Let’s use a real example. A Volkswagen ID.3 Pro has a P11D value of around £39,995 at the time of writing. Here’s what you’d pay in BIK tax over a four-year lease, assuming you’re a 20% basic rate taxpayer:
Sign before April 2027 at 2% BIK:
£39,995 × 2% = £800 taxable benefit per year
£800 × 20% income tax = £160 per year, or £13.33 per month
Total over four years: £640
Sign after April 2027 at 3% BIK:
£39,995 × 3% = £1,200 taxable benefit per year
£1,200 × 20% = £240 per year, or £20 per month
Total over four years: £960
The difference is £320 over the full lease, or £80 per year. That’s about £6.67 per month.
If you’re a 40% higher rate taxpayer, the numbers scale accordingly. At 2% BIK you’d pay £320 per year (£26.67 monthly), versus £480 per year at 3% (£40 monthly). The four-year difference jumps to £640.
When waiting might still make sense
That BIK saving needs to be weighed against what you might gain by waiting. Lease prices fluctuate based on manufacturer incentives, predicted residual values, and how badly leasing companies want your business. An £80 annual difference can easily be wiped out if you find a better deal later.
Here’s the maths: on a £450 per month lease, you’d need to find a deal that’s roughly £6.67 cheaper per month (for a basic rate taxpayer) to break even against the BIK increase. That’s about a 1.5% reduction in lease price, which is entirely plausible if manufacturers run promotions or if there’s more competition in the market by autumn.
Waiting also means access to newer models or facelifted versions with better tech, longer range, or improved charging speeds. The ID.3, for instance, received a significant update in 2023. If you’re eyeing a model that’s due a refresh, the benefits of the newer version might outweigh a modest tax increase.
The National Insurance angle
Don’t forget that salary sacrifice also reduces your National Insurance contributions, not just income tax. The BIK increase affects both calculations, but the combined saving is still relatively modest compared to your total lease cost.
Using the same ID.3 example, a basic rate taxpayer also pays 8% employee National Insurance (based on current rates, though this may change). The extra 1% BIK adds £400 to your taxable benefit over four years (£39,995 × 1% × 4 years), costing an additional £32 in NI contributions on top of the income tax difference.
Total four-year cost of waiting: £352 for a basic rate taxpayer, £672 for a higher rate taxpayer (who don’t pay the higher NI rate on benefits in kind).
What about cars with higher list prices?
The more expensive the car, the bigger the BIK difference. Take a Tesla Model Y Long Range with a P11D value of around £53,990. The four-year BIK tax difference between 2% and 3% is £432 for a basic rate taxpayer, or £864 for a higher rate taxpayer.
At this price point, you’d need to find a lease deal that’s about £9 per month cheaper (basic rate) or £18 per month cheaper (higher rate) to offset the tax increase. Still achievable, but it requires a more significant price drop.
Questions to ask yourself
Before rushing to sign before April 2027, consider: Is the car you want actually available with reasonable delivery times? Some popular models have waiting lists that might push you past the April deadline anyway. Check with your salary sacrifice provider about current lead times.
Is your employer’s scheme flexible about which cars you can choose? Some providers have limited model ranges or favour certain manufacturers. Make sure the car you want is actually on offer.
Are you genuinely ready to commit to a four-year lease? The BIK saving is spread over the entire lease term. If there’s a chance your circumstances might change, job security wobbles, or you’re not certain about the car, the tax benefit shouldn’t be the deciding factor.
The practical takeaway
If you’re already planning to get an EV through salary sacrifice in the next 12 months and you’ve found a car and deal you’re happy with, signing before April 2027 will save you money. For a typical family EV around £40,000, that’s a few hundred pounds over four years, enough to matter but not life-changing.
If you’re on the fence, or hoping for a specific model that’s not quite available yet, don’t let the BIK increase panic you into a hasty decision. Run the numbers for your specific salary, your target car’s P11D value, and compare against how much you think lease prices might drop. The tax change is real, but it’s also relatively modest in the context of a four-year financial commitment.
Whatever you decide, verify the specific BIK rates and your tax position with your scheme administrator or HMRC, particularly if your income fluctuates or you’re near a tax band threshold.