The Autumn Budget is already sparking a downturn in demand for plug-in hybrid (PHEV) company cars and looks likely to end the current revival of fleet interest.

Benefit-in-Kind on PHEVs will now jump from 5% for the current tax year to 18% in 2028/29

Anecdotal reports since the Budget suggest company car drivers with PHEVs on order are already contacting leasing firms to cancel, asking if they can switch to fully electric cars instead.

Peter Golding, managing director at FleetCheck, highlighted that anyone now paying 5% Benefit-in-Kind on a new PHEV in the current tax year would see a jump to 18% by year four in 2028/29, as a result of the Autumn Budget actions.

Fleet interest in PHEVs has surged over the last year or so following a wave of new models with a much-increased electric-only range that’s qualified them for the 5% BiK bracket; not much more expensive from a personal tax point of view than a full battery electric vehicle on the current 2% BiK rating.

“Quite a few drivers have seen these cars as a useful stepping stone to going fully electric, sidestepping concerns about range anxiety and the charging infrastructure, and they have made their way onto an increasing number of choice lists,” Golding added.

But he said the Budget had made it clear the Government wants to strongly discourage this line of thinking.

“While there is only a couple of percentage points difference in Benefit-in-Kind between an EV and PHEV for a driver today, that rises to a difference of 7% and 18% in four years. Not many people are going to want to pay that bill.”

Golding added that the move appeared to bring government policy more closely into line when it came to electrification.

“With the recent clarification that hybrids would be allowed to stay on sale until 2035, there was arguably a slight pull against zero emissions mandate targets. Now, it looks like their thinking is much more consistent, especially the fact there will be a high, flat rate for all PHEVs from 2028/29.

“If you are getting a company car, the Government wants it to be an EV.”

The new wave of PHEVs are now more likely to find sales in the private sector.

“Individual consumers are showing quite a high level of resistance to EVs for a variety of reasons and PHEVs provide a solution, as long as people are willing to pay the newly increased first-year vehicle excise duty,” Golding summed up.