Company car tax changes could penalise short-range PHEVs

Short range PHEVs could be made to pay more in company car tax if the UK Government decides to make changes to the BIK (Benefit in Kind) rates from 2020 onwards. The move has been suggested as part of a consultation document released by HM Treasury as it looks at ideas to push drivers into the cleanest vehicles on the market.

Currently, Ultra Low Emission Vehicles (ULEVs) pay the lowest levels of company car tax as the system - like that of Vehicle Excise Duty - is based on CO2 emission levels. ULEVs are vehicles that emit les than 75 g/km CO2 with an electric only range of 10 miles or more.

Now though, because of far more plug-in models coming on to the market, the Treasury wants to clamp down on those vehicles that have small electric ranges, bought only because of the large financial savings possible.

The new plans could see the lowest BIK bands given to those cars emitting less than 50 g/km CO2 - a system already established - but would see this combined with further bands dividing PHEVs up by their electric range. The longer zero-tailpipe emission range available, the cheaper the car will be to run.

The plug-in hybrid has seen huge success over the last few years, with the Mitsubishi Outlander PHEV quickly becoming the highest-selling plug-in car in the UK, helped in large part thanks to the huge savings available for company car users to switch to an electric car.

Recently, the Mitsubishi has been joined by more traditional company car models such as the VW Golf GTE, Audi A3 e-tron, BMW 330e and Mercedes C 350 e. There are also larger models including the new Mercedes E Class and Volvo S90 on their way, available as PHEV variants.

The BIK bands are only confirmed up to the end of the 2019/20 financial year currently, with BiK rates after that date expected to be announced later this year.

The consultation document says: "Evidence suggests that pure electric vehicles capable of being driven longer distances before recharging are more popular with consumers, and that plug-in hybrids with a higher zero emission range will be driven further in pure electric mode, thus increasing environmental and cost saving benefits. Therefore zero emission range is a reliable indicator of technologies, which meet government objectives and an important metric for the growing number of ULEV customers."

Click here to read the full consultation document and find out more about the proposed changes.

Find out more about Company Car Tax at our microsite

Chris Lilly

Author:Chris Lilly
Date Updated:15th Aug 2016

Related news