eVED to block lower-paid workers from salary-sacrifice schemes
The UK government’s new pay-per-mile tax on electric cars and plug-in hybrids risks blocking lower-paid workers from accessing the salary-sacrifice schemes that make those vehicles affordable, an industry expert has warned.
Announced during last year’s Autumn Budget, Electric Vehicle Excise Duty (eVED) is set to introduce a 3p-per-mile charge for all EVs and 1.5p for all PHEVs from April 2028, replacing the forecast £12 billion drop in fuel duty revenue by the 2030s as drivers move out of ICE cars.
The proposal has come under fire from fleets and leasing companies, who account for the bulk of EV and PHEV registrations and are facing an uncertain level of costs and administrative headaches while the details are finalised.
Caroline Sandall-Mansergh, manager of consultancy and channels at Alphabet GB, told Autocar that fleet managers and drivers recognise the need for tax reforms and said eVED is unlikely to upend company car policies, as almost all operators already have EVs or PHEVs. However, she continued, there are growing concerns about tax implications if cost-sensitive operators pass on the cost of eVED for private mileage to their drivers and the risk of “unintended consequences” for salary-sacrifice schemes.
These schemes enable drivers to lease a car through their employer, often at discounted rates, by ‘sacrificing’ some of their pre-tax salary to cover the monthly rentals and (if it officially emits 75g/km of CO2 or less) paying benefit-in-kind tax at low rates.
Often cheaper than leasing the same car privately, salary sacrifice has become a popular option, especially with drivers who wouldn’t otherwise be eligible for a company car.
There were five times more salary-sacrifice cars on the British Vehicle Rental and Leasing Association (BVRLA) fleet in the fourth quarter of 2025 (226,663) than the same period of 2022 (42,616), while the tax breaks mean 98% of deliveries are EVs and PHEVs.
However, there are limits. The sacrifice can’t take drivers’ remaining salary below the National Minimum Wage, so if eVED is levied on top of the monthly rental, it risks reducing choice or pushing some lower-paid workers out of schemes altogether, warned Sandall-Mansergh. In rare cases, this could even happen mid-contract when the system comes into force in April 2028.
“Most people when they look at salary sacrifice are looking at cost certainty for a period of time, and [eVED] threatens that,” she said.
“Setting the sacrifice and not changing it during the life of the contract is really important. Having a flag at that point of signing up to say ‘we may or may not be charging you eVED’ is offputting.
“For some [drivers], particularly if they are low-mileage, it’s not a material value number. But the way that it makes people feel and the way that it’s then influencing decisions is one of the biggest things.
“I think that has really been missed in the government’s strategy: how it influences behaviour, more than the number itself.”
Related posts
Latest Post
No Comments