Thinking of Buying an Electric Car?

A New £3,750 Grant May Help

If you’re thinking about changing your car, whether for personal use, work travel, or as part of a salary sacrifice arrangement, this could be a good time to explore your options. From 16 July 2025, the Government has reintroduced a grant scheme for new electric vehicles.

Buyers of fully electric cars priced under £37,000 may now receive up to £3,750 off the purchase price, as part of the UK’s wider push to increase electric vehicle uptake.

The goal is to raise EV market share from one in four today to four in five by 2030.

How Does the New Grant Work?

The discount is applied directly at the dealership when you purchase the car, so there’s no need to apply separately. The scheme is expected to remain in place until the 2028/29 financial year, subject to available funding.

The support is structured across two bands:

• BAND ONE: Up to £3,750 for vehicles that meet the strictest emissions standards and are manufactured by companies with verified Science Based Targets.
• BAND TWO: Up to £1,500 for other fully electric cars that qualify, though with slightly higher emissions or from manufacturers without verified environmental commitments.

According to the Department for Transport, more than 30 electric models are currently available for under £30,000, with updated pricing expected to appear in showrooms over the coming weeks.

Can You Salary Sacrifice?

Yes! If you’re considering an electric vehicle through a salary sacrifice arrangement, the newly introduced £3,750 grant offers an extra layer of savings, alongside the tax advantages already available through these schemes.

The Financial Advantages:

Spread over a typical three-year lease, the grant could reduce your monthly lease payments by around £104. When combined with the tax efficiencies of salary sacrifice, the overall savings can be quite significant.

A basic rate taxpayer might save a further £75 per month through reduced income tax. For higher rate taxpayers, the saving could be around £60 per month. Depending on your circumstances, this could bring the total monthly saving to around £179.

Additional Benefits:

• Salary sacrifice can reduce vehicle costs by 20–50%.
• Electric vehicles also benefit from a 3 per cent Benefit-in-Kind (BIK) rate, far lower than the rates applied to petrol or diesel cars, which can be as high as 37 per cent.
• Both employees and employers may see lower National Insurance.

Here’s an Example:

Take a £35,000 electric car as an example. With the full £3,750 grant applied, lease costs could fall by around £104 per month. A basic rate taxpayer using salary sacrifice might see further savings of £75 per month, bringing the combined monthly benefit to approximately £179.

Over the course of a year, that equates to more than £2,100 in savings, before accounting for any additional scheme incentives.

Ready to Switch to Electric?

If you’re thinking about changing your car in the coming year, this could be a timely opportunity to review your options. With the return of the government grant and the continued availability of tax-efficient arrangements such as salary sacrifice, there’s a real opportunity to reduce costs, especially when considered as part of your wider financial arrangements.

We are here to help you understand how this could fit into your wider tax and financial plans. If you would like to discuss the details further, please get in touch with your usual contact at Haggards Crowther.