Successful innovation is all about timing
In Malcolm Gladwell’s book, Outliers, the author challenges the idea that business greats achieved their success through brilliance alone. Many leaders over the years have brought exceptional innovations to the market, but those who become household names had access to the right resources and market conditions at the right time. The logical conclusion of Gladwell’s thinking is that there were other tech geniuses who were simply too early or too late to the party to maximise the opportunity.
As Marc Andreessen said, “there are no bad innovations, only early ones.” And there’s no question that the perfect conditions have aligned to drive forward the sector that loveelectric serves.
Salary sacrifice electric car benefits work in a similar fashion to employer-backed biketo-work perks, allowing employees to lease a car, including insurance, service and maintenance, by paying from gross salary.
This saves them both income tax and National Insurance, representing a saving of about 30 per cent for a lower rate taxpayer, rising to 60 per cent for a higher rate taxpayer, compared to leasing a car directly from a dealer or broker.
With savings on this scale, it’s no surprise that salary sacrifice is the fastest growing sector of the car finance market. The British Vehicle Rental and Leasing Association reports that salary sacrifice volumes are up 33 per cent year on year, with employers attracted to a benefit they can extend to all staff, especially at a time when salaries are under pressure.
Smart investors had already spotted the market potential – we’ve raised £1.3m in the past year from Techstart Ventures, Marchmont Ventures, Stephen Garland, the former chief technology and product officer for Trustpilot, and the entrepreneur Bill Dobbie.
The principal risk for these investors came
from HMRC – as an employer-provided benefit, salary sacrifice cars are taxed like company cars. What the Chancellor gives with one hand he takes away with the other… except when it comes to electric cars.
In a bid to support sales of zero-emission cars, the government has decided to keep the EV Benefit in Kind rate, a form of tax paid on a work benefit, at just 2 per cent until April 2025. In practice, this ultra-low rate sees our drivers secure net savings of 40-60 per cent on a new car lease. This makes electric cars, which are often more expensive to buy than their petrol or diesel equivalents, cheaper to lease than internal combustion engine alternatives.
Naturally, with the government desperate for revenue, there was a collective sigh of relief when the Chancellor announced that the government would continue to back battery-powered company cars by increasing the rate on them by only one percentage point per year until 2028. This gives employers and employees certainty in the costs and savings of salary sacrifice cars for the next six years.
Timing is certainly a vital ingredient of success, but as Malcolm Gladwell discovered, product design and service delivery are equally important. The conditions are perfect for salary sacrifice car schemes; now, it’s up to suppliers to capitalise on this golden opportunity to play a key role in greening workplace car parks and supporting the UK’S transition to a carbon-free economy.