The transition to electric cars is happening in stages, and there are good reasons not to overlook the halfway house. As a company car, a plug-in hybrid (PHEV) offers some of the low tax and CO2 advantages of electric driving without the range anxiety, but it’s also not necessarily the best of both worlds. Here’s why.
What incentives are available for plug-in hybrids?
The biggest nudge for drivers is company car tax. This is based on your income tax band and a percentage of the vehicle’s list price (P11d), which gets larger for models with higher CO2 emissions. Since April 2020, cars emitting 50g/km or less (which includes most PHEVs) have a set of ultra-low bands, which also incentivise longer electric ranges.
Although PHEV incentives aren’t as generous as they were, they are still attractive. A typical PHEV will be taxed at between 7-11% of its list price, compared to 25-30% for an efficient petrol or diesel car. Hardly surprising, then, that SMMT data shows 75% of PHEVs registered so far in 2021 have gone to fleets and businesses.
Why is vehicle spec important?
The new WLTP fuel economy test produces individual CO2 figures for vehicles, including the effects of any optional equipment fitted. In turn, small changes to your would-be company car’s spec can have a big effect on your tax bill, either by reducing the electric range or pushing CO2 emissions over the 50g/km threshold.
For example, adding 20-inch wheels to the Volvo XC40 T5 Inscription Pro raises CO2 emissions from 49g/km to 52g/km, and moves it up to the 14% tax band. Alongside a £1,400 increase in P11d value, the bigger wheels would cost a 40% taxpayer around £250 extra in Benefit-in-Kind each year – an 11% increase.
Similarly, the Volkswagen Tiguan e-Hybrid has a range of 28.6 miles in Elegance trim, compared to 30 for the R-Line, which doesn’t have a panoramic roof. That tiny difference is enough to edge the R-Line down into the 11% tax band, versus 13% for the Elegance, with a resulting £285 reduction in annual Benefit-in-Kind – a 15% saving.
How often are you travelling long distances?
PHEVs are uniquely sensitive to usage and, although you could technically run one without ever plugging it in, that’s the least efficient way to use it.
Testing by Emissions Analytics resulted in an average efficiency of 37.2mpg for PHEVs with their electric range depleted. As many of them also have smaller fuel tanks to make space for the battery (a BMW 330e holds 40 litres, compared to 59 for the rest of the range), it could be as frustrating to live with as it is costly to run.