BIK tax increases for hybrid company cars and double-cab pick-ups

The Autumn Budget has extended tax incentives for electric company cars until at least April 2030, but puts significant increases on the horizon for plug-in hybrids and double-cab pick-up trucks.

Company car tax has provided incentives for low CO2 vehicles since 2002. The benefit of owning a car for private use has what is called a taxable value – a percentage of the car’s list price, weighted by its CO2 emissions and for most plug-in hybrids , range electric only.

In return, drivers’ benefits-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 (fixed 13.8%, rising) are increasing. to 15.0% next April) are both calculated as a proportion of the taxable value.

Since 2020, electric cars have been taxed at ultra-low rates, currently 2%, giving a tax saving of 90% compared to a petrol or diesel car. This EV-specific rate will reach 5% in April 2028 and the Autumn Statement confirmed increases of 2% points for the next two financial years to 7% in 2028/29 and 9% in 2029/30.

It’s a proportionately steep increase as all other rates will increase by 1% point each year, but still incentivizes EVs and extends the gap to plug-in hybrids (PHEVs).

PHEVs will face some of the biggest tax increases. From April 2028, the current system for vehicles emitting 1-50g/km of CO2 – five tax bands that encourage longer electric-only ranges – will be replaced by a single rate of 18%, rising to 19% in 2029/30. For PHEVs capable of driving at least 130 miles on battery power, company car tax rates will more than triple overnight, from 5% to 18% (although no vehicles meet these criteria yet).

The Volkswagen Golf eHybrid, a PHEV with one of the longest electric 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 increase from £49 to £111 at the time.

The autumn budget also closes two long-standing company car tax loopholes.

Firstly, from 6 April 2025 new double cab pick-ups will be classified as passenger cars for company car tax purposes with BIK and NIC based on CO2 emissions.

Today they are taxed as light commercial vehicles (LCVs), based on a flat taxable value of £3960which has made them very affordable company cars compared to an equivalent SUV.

For Britain’s most popular pick-up, the Ford Ranger XLT, the monthly BIK bill for a 20% ratepayer will quadruple next year, from £66 to £244, as a result of these changes. However, vehicles registered until 5 April 2024 will continue to be taxed according to the current rules.