Main image - VOLVO XC90 ESTATE 2.0 T8 PHEV Plus Dark 5dr AWD Geartronic - 8% BIK in 2024/25 tax year.
The Benefits of Choosing a PHEV as a Company Car in the UK
Introduction
In recent years, the automotive landscape has significantly shifted towards greener alternatives. For limited company employees in the UK, choosing a Plug-in Hybrid Electric Vehicle (PHEV) as a company car not only aligns with sustainability goals but also brings a range of tax benefits. Below we detail the financial advantages of selecting a PHEV for your business vehicle.
- Understanding PHEVs
What is a PHEV? A Plug-in Hybrid Electric Vehicle (PHEV) combines a traditional internal combustion engine with an electric motor. This allows for reduced fuel consumption and lower emissions compared to conventional vehicles.
- Enhanced Tax Efficiency
Benefit-in-Kind (BiK) Tax Rates PHEVs are subject to lower Benefit-in-Kind (BiK) tax rates compared to conventional petrol or diesel cars. For the tax year 2024/2025, the BiK rate for PHEVs is significantly lower due to their lower CO2 emissions, meaning employees pay less tax on their company car. The key thing is to check the official battery range of the PHEV vehicle as this will determine the actual CO2 percentage that you are taxed on.
| CO2 G/Km | Battery Electric Mileage Range | 2024/25 | 2025/26 | 2026/27 | 2027/28 |
| 1-50 | > 130 miles | 2% | 3% | 4% | 5% |
| 1-50 | 70 - 129 miles | 5% | 6% | 7% | 8% |
| 1-50 | 40 - 69 miles | 8% | 9% | 10% | 11% |
| 1-50 | 30 - 39 miles | 12% | 13% | 14% | 15% |
| 1-50 | < 30 miles | 14% | 15% | 16% | 17% |
- Reduced National Insurance Contributions
By choosing a PHEV, companies can save on National Insurance contributions. Lower BiK rates translate to reduced taxable benefits, which can lead to significant savings for both employees and employers.
- Capital Allowances
Tax Relief on Capital Allowances Businesses can claim enhanced capital allowances when investing in low-emission vehicles like PHEVs. This means that if the PHEV CO2 is 50g/km or below, up to 100% of the cost of the vehicle net finance rental can be written off against taxable profits in the your tax year, improving cash flow.
- Fuel Savings and Charging Incentives
Cost-Effective Driving PHEVs often allow for lower fuel costs, especially if employees can charge their vehicles at home or work. The government also encourages the use of electric vehicles through various incentives, including grants for installing work charging points.
- Environmental Impact
Corporate Responsibility Choosing a PHEV aligns with corporate social responsibility goals. Companies that prioritise environmentally friendly practices enhance their reputation and may even attract eco-conscious clients and partners.
- Future-Proofing Your Fleet
Transitioning to Electric As the UK moves towards a more electric future, incorporating PHEVs into your fleet is a strategic step. They are ideal for those employees still not comfortable changing to a full electric vehicle due to range anxiety issues. With upcoming bans on new petrol and diesel cars, having a PHEV now positions your business to adapt to future regulations.
Conclusion
Opting for a PHEV as a company car offers significant tax benefits and aligns with the UK’s green initiatives. With reduced BiK rates, capital allowances, and lower running costs, limited company employees can make a financially savvy decision that also contributes to a sustainable future.
If you need more tax advice on your next company car you can ring 028 9693 6363 or email sales@everyvehiclelease.co.uk. Want to keep up to date on all things to do with contract hire? Sign up to our monthly news letter Newsletter Sign Up.
LEXUS NX450+ PHEV Premium (image below) - 8% BIK in 2024/25 tax year
