The Chancellor’s recent budget announcement brought mixed news for company car drivers and fleet managers: fuel duty remains frozen, but hybrid drivers will see an increase in benefit-in-kind (BIK) tax rates, especially on plug-in hybrid electric vehicles (PHEVs). Meanwhile, fully electric vehicles continue to receive tax incentives to boost their adoption.
Key Points of the New BIK Tax Rates
- BIK Tax Hikes for Hybrids Starting 2028/29
Starting in the 2028/29 tax year, company car drivers of PHEVs will see a substantial increase in their BIK tax rates, with rates increasing up to 13 percentage points. A notable change is the removal of zero-emission mileage as a factor in calculating BIK, meaning vehicles will no longer benefit from lower BIK rates based on their electric-only range. - Extension of Company Car Tax Tables
Previously, fleets and drivers only had clarity on company car tax rates through April 2028. The government has now extended tax tables to the 2029/30 tax year, allowing more transparency for long-term planning. This update is essential as it gives fleets insight into tax liabilities that might affect contracts stretching over four years or more. - Increased Rates for Fully Electric Vehicles (EVs)
Although electric vehicles remain incentivized, BIK rates will rise for zero-emission vehicles by two percentage points per year in 2028/29 and 2029/30, taking the rates to 7% and 9%, respectively. While EVs still have a lower BIK tax compared to hybrids, this slight increase is a gradual shift in the government’s approach to EV tax incentives. - Significant Impact on Plug-in Hybrid Rates
Plug-in hybrids with CO₂ emissions of 1g to 50g per kilometer will now face much higher BIK rates—up to 18% in 2028/29 and 19% in 2029/30. For PHEVs capable of up to 69 miles in electric-only range, this change means an increase of seven percentage points year-on-year, a significant rise for drivers and fleets with PHEV commitments. - One Percent Yearly Increase for Other Emission Bands
Vehicles in all other emission bands will see a one percentage point annual increase in their BIK rate, capped at a maximum rate of 38% for 2028/29 and 39% for 2029/30. This means vehicles with higher emissions will face continued incremental tax increases over the next two years.
This budget update underscores a shift toward favoring fully electric vehicles while imposing higher tax rates on hybrids. For fleets and company car drivers, these adjustments emphasize the importance of planning for long-term tax impacts based on emission profiles and vehicle type.