Why Plug-in Hybrids Are a Smart Choice
Plug-in hybrid cars have become increasingly popular for many reasons, including their environmental friendliness and cost-effectiveness. But one often-overlooked advantage is their potential to significantly reduce tax bills, especially for drivers looking to choose a car through a salary sacrifice scheme, as these vehicles are liable for company car tax (Benefit-in-Kind tax).
Understanding Company Car Tax on Hybrid Salary Sacrifice Cars
Benefit-in-Kind (BIK) tax is essentially a tax on the perk of driving a salary sacrifice car. The amount of tax you owe depends on the car's CO2 emissions and, for plug-in hybrids, how far it can travel on electric power alone.
Hybrids: A Tax-Efficient Choice
Plug-in Hybrids often qualify for lower BIK tax rates compared to traditional petrol or diesel cars. This is because they can switch to electric power for shorter journeys, reducing overall emissions and, consequently, your tax bill.
Key Benefits of Hybrid Vehicles:
Lower BIK Tax: By selecting a plug-in hybrid with a suitable electric range, you can significantly reduce your BIK tax charges.
Fuel Efficiency: Hybrids combine the best of both worlds: the efficiency of electric power and the flexibility of a traditional engine.
Reduced Emissions: Hybrids emit fewer emissions than traditional petrol or diesel cars, contributing to a cleaner environment.
Quiet Operation: Electric motors offer a silent and smooth driving experience, especially in urban areas.
No Range Anxiety: Hybrids can switch to their petrol or diesel engine when the battery is too low, eliminating the worry of running out of charge.
Plug-in Hybrids – An Employer National Insurance Efficient choice:
By giving an employee less salary in return for a vehicle under a salary sacrifice arrangement, the employer will save 15% in NI contributions on the amount sacrificed. Due to the low Co2 emissions on Plug-ins, the employer pays much lower Class1A NI payments on the ‘Company Car’ BIK provision, resulting in big savings that will mitigate some of the increased NI contributions they will have to pay from April 2025.
Example Plug-in Hybrid Models with Low BIK Rates:
Mercedes-Benz C Class Saloon C300e AMG Line - 5% Benefit in Kind rate
Mercedes-Benz GLC 300e - 5% Benefit in Kind rate
Range Rover Sport PHEV - 5% Benefit in Kind rate
BMW 3 Series Saloon 330e - 8% Benefit in Kind rate
Lexus NX 450h+ - 8% Benefit in Kind rate
Kia Sportage PHEV - 8% Benefit in Kind rate
Volvo XC60 PHEV - as low as 7% Benefit in Kind rate
Toyota C-HR Plug-In Hybrid - 8% Benefit in Kind rate
Audi Q3 Estate 45 TFSI e S Line - 12% Benefit in Kind rate
While electric vehicles have their own merits, plug-in hybrid vehicles offer a compelling alternative for many drivers, especially those looking to reduce their tax burden. By understanding the BIK tax system and considering the specific needs of your driving habits, you can make an informed decision about the best vehicle for you.
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