Search
Close this search box.
Sign up for our weekly Newsletter

Budget: PHEVS and double cabs off the fleet choice list

Budget small print includes major hikes to tax rates.
2410 ranger phev charging

Share

31 October 2024

Plug-in hybrid cars and double-cab pick-ups are likely to become a much less palatable option for fleets in future following changes to their tax status in the Budget.

After an initially broadly positive reaction to the measures announced by Chancellor of the Exchequer Rachel Reeves on 29th October, detailed study of future taxation has revealed some significant changes that bodies such as the Association of Fleet Professionals (AFP) believe will prompt widespread rewriting of company car choice lists.

Following the Budget, in which the Chancellor announced that future benefit-in-kind (BIK) tax rates would continue to incentivise the use of electric vehicles (EVs), the Government published tables for two additional years, up to 2029/30.

Currently drivers of EVs pay 2% BIK and prior to the Budget the tables to 2027-28 showed the rate increasing by 1% each year. Now in 2028-29 and 2029-30 it will increase by 2% so in the latter year EV drivers will be paying 9%.

However drivers of plug-in hybrids will see a much larger rise, as a differentiator based on how far the vehicle can travel on electric power alone has been amended. Recent times have seen the launch of several new PHEVs with longer electric ranges and with the existence of the differentiator a rapid rise in PHEV take-up.

Currently PHEVS able to complete 130 miles or more solely on electric power are taxed at the same rate as full EVs, those capable of more than 70 miles 3% higher (5% in 2024-25), and above 40 miles six points higher (8% in 2024-25).

These rates will increase by the same two points per year ratio as full EVs over the next three years, but in 2028-29 will jump to 18% – 11% more than for a full EV.

Drop that pick-up

Meanwhile the Government is making a major change in the tax status of double-cab pickups to that of company cars – a similar measure was announced by the previous Conservative administration in February 2024 and then abandoned just a week later following major criticism, particularly from the farming industry.

from April 2025 double-cab vehicles of one tonne or more will be treated as company cars, which will mean much higher BIK for their drivers and lower capital allowances for the businesses using them. However grandfather rights will apply to existing users until the 2029-30 tax year at the latest.

Under the new regime a typical user of a Ford Ranger, for example, could pay three and a half times more in BIK than they do currently, while a business formerly able to reclaim 100% of the price of the vehicle will now be limited to just 18%.

Reacting to the measures Paul Hollick, chair of the AFP, described them as something of a tidying-up operation by the Government. “The moves made on PHEVs and double cabs, as well as arguably on dealer employee car ownership schemes, have largely removed any grey areas,” he said.

“The government is making it pretty clear that it wants all company car drivers behind the wheel of a zero-emissions electric car while paying benefit-in-kind at the standard rate. Almost anything that resembles a departure from this model has gone.

“There’s an argument that this provides a high degree of clarity for fleets but it does also mean that some drivers and employers are facing some big bills unless action is taken, and when it comes to PHEVs and double cabs, this is likely to lead to widespread redrawing of choice lists with a renewed emphasis on EVs.”

Hollick added that drivers who have recently taken on a PHEV on a four-year cycle will see their tax rise massively in its last year; “No doubt many of them will head into work this morning to talk to their employer about the possibility of getting out of that car earlier.”

Award Winners 2024

Share this article

Facebook
Twitter
LinkedIn
WhatsApp
Reddit
Email

Want more motoring news?

Sign up here for our free weekly serving of motoring.

Sign up here for our free weekly serving of motoring.

Picture of Andrew Charman

Andrew Charman

Andrew Charman has been a motoring journalist for more than 30 years, writing about vehicles, technology and the industry. He is a Guild of Motoring Writers committee member and has won several awards including for his business coverage.

Latest news

Top

Enter the 2024 awards

Showcase your achievements, gain industry recognition, and elevate your brand to new heights