How to make the most out of your PHEV company car

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 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 had a set of ultra-low bands that incentivise longer electric-only ranges. 

Autocar's company car tax calculator shows exactly what you'll pay for every make and model

Although PHEV incentives aren’t as generous as they were, they're still attractive. A typical PHEV will be taxed at between 8-12% of its list price, compared with 25-30% for an efficient petrol or diesel car. It’s why fleets and businesses account for the vast majority – over 70% last year, according to the SMMT – of new PHEVs sold in the UK.

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 specification can have a big effect on your tax bill, either by reducing the electric-only range or pushing CO2 emissions over the 50g/km threshold. 

For example, adding the optional 20-inch wheels to a Jaguar F-Pace R-Dynamic SE PHEV raises CO2 emissions from 49g/km to 51g/km, with a 3%-point increase in company car tax band to 15%. Alongside a £200 increase in P11d value, the bigger wheels would cost a 40% taxpayer around £65 extra in Benefit-in-Kind each month - a 25% increase.

Similarly, the Volkswagen Tiguan eHybrid has an electric-only range of 29 miles in Elegance trim, compared with 30 miles for the R-Line, which doesn’t have a panoramic roof. That tiny difference is enough to edge the R-Line down into the 12% tax band, versus 14% for the Elegance, with a resulting £148 reduction in annual Benefit-in-Kind for a 20% taxpayer – 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 battery depleted. As many of them also have smaller fuel tanks to make space for the battery (the BMW 330e holds 40 litres, compared with 59 litres for the rest of the range), it could be as frustrating to live with as it is costly to run.