UK drivers are facing a car insurance penalty, with some motorists paying up to £273 more than necessary. New analysis reveals that electric car owners paying for insurance themselves are paying more than those using salary sacrifice schemes.
How Salary Sacrifice Works
Traditional car insurance is paid from taxed income, whereas salary sacrifice payments are deducted from gross pay before income tax and national insurance. Salary sacrifice schemes include fully comprehensive cover bundled with servicing, maintenance, tyres, breakdown, and road tax in one monthly figure.
Potential Savings for EV Owners
Data from The Electric Car Scheme shows that a typical electric car insurance policy costs £650 per year. However, lower-rate 20% taxpayers would pay just £468 annually, saving £182 per year. Higher-rate 40% taxpayers would pay only £377 per year under a salary sacrifice scheme, saving £273 on average. Over a typical four-year lease, individuals could save £1,092.
With over two million electric car owners in the UK, many may be unaware of these potential savings.
Expert Insight
Thom Groot, CEO of The Electric Car Scheme, said: "Insurance is the one running cost that has caught drivers out, because premiums are typically higher than petrol cars, and renewals have climbed just as people expected their EV to start saving them money."
He added: "What tends to get missed is that how you pay for insurance matters as much as the premium itself. Bundled into salary sacrifice and paid from gross salary, the same policy costs a higher-rate taxpayer far less, which quietly turns the most awkward cost of going electric into one of the easiest."
Comparison with Petrol Cars
Previous data from Octopus EV indicated that salary sacrifice deals on electric cars are cheaper than running petrol vehicles. The median lease price for an electric car in the UK is around £369 per month, compared with £409 for a petrol model, potentially saving drivers more than £1,600 over a typical lease.
