On the 26th of November 2025, during the Autumn Budget statement, Chancellor Rachel Reeves announced sweeping changes to workplace benefits for UK businesses.
Amongst these national changes included a controversial £2,000 cap on pension salary National Insurance relief, which will take effect from April 2029. That said, electric vehicle (EV) schemes emerged unscathed, which will come as a relief for some tech companies and agencies competing for top talent, who may argue that the Autumn Budget clarity couldn’t have come at a more convenient time.
It’s fair to say that the Autumn Budget 2025 delivered substantial reforms to salary sacrifice arrangements, not all of which have been met with acclaim.
From April 2029, pension contributions via salary sacrifice will face National Insurance charges on amounts exceeding £2,000 annually, a measure expected to raise £4.7 billion for the Treasury. Also affected was the Cycle-to-Work scheme, which is also potentially subject to new spending restrictions; speculation is that a cap of between £2,000 and £4,000 will be introduced to prevent what the UK government deems to be “non-essential high-end purchases.”
Despite these restrictions, electric car salary sacrifice schemes remain completely protected, with Benefit-in-Kind (BiK) rates for EVs staying locked at 3% for the remainder of the 2025/26 tax year. This will rise gradually to 9% by 2029, which is dramatically lower than the 37% maximum applied to petrol and diesel vehicles.
These changes are undoubtedly deliberate as the UK stays fervent in its commitment to the ambitious Zero Emission Vehicle mandate, requiring 80% of new cars sold to be zero emissions by 2030, and occupying 100% of the market by 2035.
The government’s decision to introduce these changes reflects their commitment to long-term Net Zero targets. Transport accounts for approximately 25% of UK greenhouse gas (GHG) emissions, and the gradual transition to electric vehicles remains one of the most effective tools for reducing individual and collective carbon footprints.
Safeguarding EV salary sacrifice while imposing restrictions on other benefits illustrates the government’s policy priorities unmistakably. Enforcing caps and restrictions on EVs would undermine the government’s entire environmental strategy.
The advantages this offers digital agencies and companies also need to be made abundantly clear. For example, someone with a salary of £40,000 every year could save roughly £200-£300 a month on an EV through salary sacrifice, as opposed to taking out a private lease agreement. The costs, such as insurance, maintenance, tyres, and breakdown cover, are included in one pre-tax payment, making the entire arrangement exceptionally attractive. This is beneficial for agencies trying to hire new team members in a rather depleted talent pool, as now they can offer premium vehicles via salary sacrifice as an employment perk.
With these EV salary sacrifice changes, employers now offer more attractive onboarding perks if candidates are successful post-probation. However, they (and employees) will, in just over 3 years, be subject to National Insurance Contributions (NICs) for pension salary sacrifice arrangements above £2,000 annually. This could mean, for example, that a mid-career employee earning £60,000, who sacrifices 6% into their pension (£3,600) every year, will pay National Insurance on £1,600 of that amount from 2029, which adds up depending on their earnings band. Employers will also be subject to NICs on every pension contribution amount above £2,000.
Conversely, the same employee could access a premium EV with comprehensive running costs included, save substantially on leasing costs and fees, and be completely certain about future tax charges. While nothing is ever guaranteed, at present, the EV benefit provides immediate and long-term value.
For UK businesses evaluating their benefits strategy, the Budget has reinforced how EV salary sacrifice schemes are worth integrating into your employment packages.
Businesses already using an electric vehicle salary sacrifice scheme should review their benefits strategy closely, with an objective pair of eyes, now that the Budget is in the rear-view mirror. While pension salary sacrifice remains valuable up to the £2,000 threshold, it’s undoubtedly taken a hit. EV schemes, by comparison, have looked very attractive as a benefit available to UK employers and employees.
As is the case with most business matters, timing is everything. The pension cap is not set to take effect until 2029, giving businesses ample time to position EV salary sacrifice as a leading benefit offering. Use this time to thoughtfully and methodically integrate the change to existing staff, and integrate it prominently into your recruitment and marketing materials, as well as your brand values.
The Autumn Budget 2025 represented a pivotal moment for UK employers trying to future-proof themselves and establish thriving operations for years to come. For those committed to innovation, sustainability and attracting exceptional talent, the message couldn’t be clearer, with premium EVs via salary sacrifice an inherently safer, more valuable, and more policy-aligned option. In a sector where getting there first is key, there’s no better time to drive further towards this perk becoming part of the very fabric of your business.