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LOW tax rates on electric vehicles has resulted in a large increase – now 53% compared to 39% in 2020 – in employers offering salary sacrifice to non-company car drivers, new research shows.

Last year just a fifth (20%) of fleets said they were offering some form of finance solution, but today this has also risen steeply to more than a third (37%) according to the 2021 Arval Mobility Observatory Barometer, which provides a picture of the current trends affecting company cars and vans across the UK and Europe.

In addition to salary sacrifice, the car schemes offered by employers surveyed included a cash allowance (55%) and personal contract hire (39%).

Shaun Sadlier, Head of Arval Mobility Observatory in the UK, explained that the zero or very low benefit-in-kind tax rates on electric cars introduced by the government in April 2020 had almost certainly powered the majority of this dramatic increase in salary sacrifice schemes.

“Low taxation on EVs has made salary sacrifice a very attractive option for employees and employers, meaning that the latest, most advanced and environmentally-friendly cars can be offered to staff at extremely attractive monthly rates.

“This increase is concentrated among larger employers with more than 500 employees, something that is probably to be expected. Setting up schemes of this kind may not be as high a priority for smaller businesses– although there is impetus within Arval to increase their viability for SMEs.

“We could potentially see salary sacrifice continue to accelerate further in the coming years. It provides a means for employers to offer the considerable benefit of new EVs to their employees at little to no cost to their company and will continue to do so as long as benefit in kind taxation remains low.

“What we are seeing emerging is a definite future mobility role for EV-based salary sacrifice as a key element in a wave of new benefits initiatives that are designed to bring innovative options and ideas into play for employees, with only a very limited investment required by their employer.”

DO YOU OFFER ANY OF THE NON-COMPANY CAR DRIVERS IN YOUR COMPANY A SOLUTION TO ENABLE THEM TO FINANCE A PERSONAL CAR?

Overall              Fewer than       10-99              100-499           More than 1000
10 employees   employees      employees       employees

YES          37% (20%)        9% (9%)           27% (17%)      52% (25%)       77% (33%)

WHICH FINANCE SOLUTIONS DO YOU OFFER TO YOUR EMPLOYEES?

Total

Cash allowance                 55% (52%)
Salary sacrifice                  53% (39%)
Personal contract hire       39% (28%)

2020 data included in brackets in both tables


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