There have been important developments concerning the taxation of plug-in hybrid vehicles (PHEVs) and the potential impact on your vehicle fleet and drivers.
Government’s Relaxation of ZEV Mandate:
- The recent Government announcement includes a relaxation of the Zero Emission Vehicle (ZEV) Mandate, allowing petrol plug-in hybrids and hybrid vehicles to remain on sale until 2035.
- Car manufacturers have been enhancing PHEVs with improved battery range and, in light of this announcement, it is likely that the choice of high quality plug-in hybrids will continue to be available over the next 10 years, although as we near 2035 production will inevitably begin to decline.
Tax Changes:
- While the relaxed ZEV Mandate rule gives an extension to their availability, it is important to understand that the window for low Benefit-in-Kind (BIK) tax on PHEVs is limited.
- Following the announcement in the Autumn Budget, benefit in kind (BIK) taxation on certain plug-in hybrids will more than double from the start of the tax year 2028/29.
- An illustration using the popular BMW 330e plug-in hybrid shows a benefit-in-kind tax banding of 9% for the current tax year, costing a 40% taxpayer £1,734 per annum. Over the next two tax years, the tax banding steps up by 1% each year to 11%, representing a tax cost of £2,120. However, in the 2028/29 tax year, the percentage banding leaps to 18%, which means the 40% company car driver would be paying £3,468 per annum, equivalent to a 100% increase.
Our advice regarding plug-in hybrids
- There may be drivers on your fleet who are still not ready for a fully electric car in 3 years’ time. For these drivers, despite the escalation in rates, a plug-in hybrid will continue to attract lower BIK tax than many have been accustomed to paying over the years for petrol and diesel models.
- Also, the choice of fully petrol or diesel models will have declined so significantly due to the ZEV mandate that PHEVs will be the primary alternative to a BEV until they are removed from sale.
- It is important therefore that the forthcoming BIK tax increases are communicated to your drivers.
- If you would like us to assist with this please contact us.
As always, the team at Grosvenor is available to talk to you about your specific choice lists and we are here to offer advice and guidance on the best course of action for your vehicle fleet and drivers.
If you have any questions or require further information, please do not hesitate to reach out to our team.
For more information on any aspect of vehicle taxation, please contact Grosvenor on 01536 536 536
www.grosvenor-leasing.co.uk
