Guidance

Electric vehicle salary sacrifice guidance for academy trusts and colleges – applicable from the effective dates of their respective 2026 financial handbooks

Updated 15 July 2026

Applies to England

The overarching framework for the implementation of effective financial governance, management and other controls consistent with the obligations that trusts and colleges have as public-funded bodies are set out in the academy trust handbook (ATH) and college financial handbook (CFH) respectively (the sector handbooks).

Trusts and colleges must follow this guidance if they are considering offering their employees the opportunity to lease an electric vehicle (EV) for commuting and personal purposes through an electric vehicle salary sacrifice (EVSS) scheme.

The guidance explains:

• what trusts and colleges must do before entering a scheme
• when trusts and colleges need to seek DfE approval for an EVSS scheme
• the comprehensive mitigations that should be put in place to ensure that no cost or financial liability falls on the trust or college if an employee does not fulfil their contractual obligations with the scheme provider

What trusts and colleges must do

Before entering an EVSS scheme, trusts and colleges must:

• follow their own procurement procedures and ensure they meet their sector handbook requirements relating to procurement

• ensure that they have adequate resources to implement and manage a salary sacrifice scheme
• comply with HMRC requirements
• seek legal, HR and audit advice to assess how each scheme operates
• put in place comprehensive mitigations to ensure that no cost or liability falls on the trust or college if an employee does not fulfil their contractual obligations with the scheme provider
• clearly document their decision-making and financial risk mitigations
• ensure that employees receive clear information before they join the scheme and are advised to seek independent advice on the tax and pension implications of participating

When DfE approval is required

DfE prior approval is not required for EVSS schemes that present no cost or liability to the trust or college if an employee does not fulfil their contractual obligations with the scheme provider or where any liability has been comprehensively mitigated.

Schemes that do not meet this condition require DfE approval.

Trusts under a Notice to Improve (NtI) must obtain prior DfE approval to enter any EVSS scheme. Colleges under an NtI must follow the conditions set out in the NtI associated with consulting DfE.

Choosing and operating a scheme

Trusts and colleges must complete their own due diligence on suppliers to find an EVSS scheme that offers value and best suits their needs.

The trust or college leases vehicles through its master hire agreement with the EVSS leasing company. Employees’ individual salary sacrifice leasing agreements must clearly set out that the employee is responsible for the vehicle and all chargeable costs including early termination fees and those relating to damage or poor maintenance.

In compliance with HMRC Salary Sacrifice requirements, there must be a contractual agreement between the trust or college and employees that payments due under the scheme will be deducted through payroll.

Arrangements should be in place to minimise the administrative burden to the trust or college so that the scheme provider, rather than the trust or college, is responsible for contacting the employee directly to seek any remedy under the lease agreement.

If the chosen scheme falls outside the description above, or the trust or college is under an NtI, trusts and colleges must seek DfE written approval before entering the scheme.

Trusts and colleges should consider using the Government Commercial Agency (GCA) supplier list when selecting an appropriate scheme. Detailed guidance and advice are available on the GCA website. 

Managing risks

Trusts and colleges must ensure that they have comprehensive mitigations to ensure that no cost or financial liability falls on the trust or college if an employee does not fulfil their contractual obligations with the scheme provider. Trusts and colleges must keep a record of their risks and mitigations.

These should include:

• retaining a proportion of any National Insurance and employer pension contribution savings resulting from the scheme to provide a fund or insurance to cover the cost or cashflow impact of any leases ending early (limited to the period when the trust or college could be liable)
• carefully managing the scale of any scheme, including limiting participation and allowing employees to lease no more than one EV
• reviewing the EVSS scheme annually to ensure the provider continues to offer value, the findings of the review being presented to the board
• the agreement between the trust or college and the employee clearly sets out the employee’s obligations and liabilities if they terminate the lease before the end of the contractual period

Employees participating in the scheme should meet eligibility criteria. Trusts and colleges should monitor employees’ eligibility and make appropriate amendments to their terms of employment before they enter the scheme.

Participating employees must:

• meet the earnings threshold so that their salary remains above national minimum wage after the salary sacrifice payments are deducted

• have completed their probation
• be on payroll (PAYE)
• have a valid UK driver’s licence
• not be subject to any current performance or conduct-related procedures

Support for employees

Salary sacrifice schemes have an impact on pension contributions. Over the course of a salary sacrifice lease term employer and employee pension contributions are reduced, which can impact retirement income.

For example, if the employee’s monthly salary is £3,000 and the electric vehicle salary sacrifice deduction is £300 per month, pension payments from the employee and employer will only be made in relation to £2,700.

Trusts and colleges should ensure employees are aware of the financial implications of salary sacrifice. Certain schemes require employees to take independent advice before entering the contract.

Schemes entered before the effective dates of the 2026 sector handbooks

Trusts and colleges already offering an EVSS scheme should evaluate their scheme and, if it is not compliant with this guidance, move to one that meets the terms of their sector handbook and this guidance at the earliest opportunity without breaching agreements in place with their existing provider.

How to contact us

Trusts can contact us for any questions regarding EVSS schemes, or submit an approval request, using the Customer Help Portal. Colleges should submit an FE transaction approval request.