The Autumn Budget has extended tax incentives for electric company cars until at least April 2030 but put significant rises on the horizon for plug-in hybrids and double-cab pick-up trucks.
Company car tax has incentivised low-CO2 vehicles since 2002. The benefit of having a car for personal use has what’s called a taxable value – a percentage of the car’s list price, weighted according to its CO2 emissions and, for most plug-in hybrids, electric-only range.
In turn, drivers' benefit-in-kind (BIK), which is paid at the same rate as their income tax band (typically 20% or 40%), and employers’ Class 1A National Insurance Contributions (a flat 13.8%, rising to 15.0% next April) are both calculated as a share of the taxable value.
Since 2020, electric cars have been taxed at ultra-low rates, currently 2%, providing a 90% tax saving compared with a petrol or diesel vehicle. That EV-specific rate will reach 5% by April 2028, and the Autumn Statement confirmed 2%-point increases for the next two financial years, to 7% in 2028/29 and 9% in 2029/30.
It’s a proportionally steep increase, as all other rates will rise by 1% point each year, but still incentivises electric cars and widens the gap to plug-in hybrids (PHEVs).
PHEVs will face some of the biggest tax rises. From April 2028, the current system for vehicles emitting 1-50g/km CO2 – five tax bands, incentivising longer electric-only ranges – will be replaced by a single 18% rate, rising to 19% in 2029/30. For PHEVs capable of travelling at least 130 miles on battery power, company car tax rates will more than triple overnight, from 5% to 18% (although no vehicles meet those criteria yet).
The Volkswagen Golf eHybrid, a PHEV with one of the longest electric-only ranges on the market, at 88 miles, will move from an 8% tax band to the new 18% tax band in April 2028. For a 20% income taxpayer, monthly BIK tax will rise from £49 to £111 at that point.
The Autumn Budget also closes two long-running company car tax loopholes.
Firstly, from 6 April 2025, new double-cab pick-up trucks will be classed as passenger cars for company car tax purposes, with BIK and NICs based on CO2 emissions.
Today, they're taxed as light commercial vehicles (LCVs), based on a flat taxable value of £3960, which has made them very affordable company cars compared with an equivalent SUV.
For the UK’s most popular pick-up, the Ford Ranger XLT, the monthly BIK bill for a 20% taxpayer will quadruple next year, from £66 to £244, as a result of those changes. However, vehicles registered until 5 April 2024 will continue to be taxed under the current rules.
Join the debate
Add your comment
Good to finally see the goverment finally wake up and realise that the PHEV is nothing more than a tax dodger on wheels. We'll look back and laugh at how 2400 kg SUVs were ever able to claim 565mpg, yes check out the website, GLC300 4matic.
You shouldn't judge other people just trying to do the right thing based on your poor life choices, you angry, angry little old man!
I'm not judging anyone you sad muppet. Neither am I angry, little or particularly old, as to people choosing phev's because of my poor choices, what are you on.
Now get back to converting your Vauxhall Viva to a hydrogen powered PHEV.