Company car drivers are facing a hike in BiK rates on plug-in hybrids this year, due to a radical reconfiguration in the way the emissions are calculated.
Since the emissions figure of a vehicle forms part of the equation that calculates how much tax a company car driver must pay for driving their vehicle, this is set to have considerable implications and consolidate take up of electrical vehicles as the route that makes most financial as well as environmental sense.
Until now, the emissions for a plug-in hybrid electric vehicle (PHEV) have been calculated based on 6e emission standards tests which simulate 800km (497 miles) of driving but new tests called the Euro 6e-bis standard, will test journeys up to 2,200km (1,367 miles) to give a better idea of how PHEVs perform in real life.
The International Council on Clean Transport (ICCT) said: “Over the past several years, it has become evident that the currently used UF curve does not reflect the real usage of PHEVs resulting in unrepresentatively low official CO2 emission values.”
Models launched from 1 January 2025 onwards will be subject to the new tests, which may result in a doubling of the emissions figures for PHEV vehicles that traditionally tended to attract a 5%, 8% or 12% benefit-in-kind (BiK) rate.
More accurate due to the increase in miles they are being performed across, the new tests take better into account the fact that a PHEV is generally driven in fully electric mode for the first part of a journey then more of less fully in ICE mode for the remainder. When only a very limited number of miles are assessed, as in the case of the old tests, a skewed mileage figure results.
At the end of the year, all cars on sale will be included, meaning existing models will have to be retested in order to comply.
To illustrate the effect the new parameters have, the International Council on Clean Transport (ICCT) analysed the performance of a BMW X1 xDrive25e under the revised conditions.
The X1’s emissions figures rose from around 45g/km to 96g/km, marking a huge increase from its Benefit-in-Kind company car tax banding of 8 per cent to 24 per cent under the new 6e-bis tests.
A further advancement in emissions standards is expected in 2027, when ‘Euro 6e-bis-FCM’ comes into force, testing over a total distance of 4,260km (2,647 miles), increasing the same BMW’s emissions to 122g/km, according to the ICCT.
Only cars bought brand new will be affected and there are currently no plans to backdate the bandings for existing company car users but those ordering new cars this year may see an increase in the car’s BiK tax rate if the vehicle is re-assessed between the point of order and delivery.
It’s another blow for PHEVs following changes to the BiK bands in the October budget which saw them being hit by higher company car tax thresholds from 2028.
By making PHEVs less attractive from a tax perspective, an expected downturn in plug-in hybrid demand is anticipated to hasten the UK’s transition to fully electric vehicles.
The developments mirror the reality that once the electric battery’s drained, a plug-in hybrid is rarely any more efficient than an ICE vehicle with benefits generally limited to families that can charge at home and predominately need a car for short, mainly battery-powered commutes.
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