Exploring the difference in salary sacrifice and
Benefit-in-Kind tax rates

Electric vehicles (EV) and plug-in hybrid electric vehicles (PHEV) have become increasingly popular in recent years as more people switch to greener and more fuel-efficient modes of transport. But how do EV and PHEV compare when it comes to salary sacrifice and Benefit-in-Kind (BiK) tax rates? And what should you consider when choosing between an EV and a PHEV?

On the surface, the difference between EV and PHEV is quite straightforward. An EV is powered entirely by an electric battery and doesn’t require petrol or diesel. In contrast, a PHEV is a hybrid between a plug-in electric vehicle and a traditional internal combustion engine (ICE) vehicle, making use of both electric power and petrol or diesel. PHEVs will typically run on electricity until the battery is depleted. Once that happens, rather than having to stop and recharge mid-journey, the vehicle will automatically switch over to the internal combustion engine for the source of power.

Salary sacrifice and BiK tax rates

When it comes to salary sacrifice and BiK tax rates, the most crucial factor to consider is the CO2 emissions of the vehicle. EVs are the undeniable champions in the journey towards zero CO2 emissions. These sustainable vehicles benefit from the lowest BiK tax rates and salary contributions, thanks to their eco-friendly credentials. If you’re looking to save money, EVs stand out as the most cost-effective and environmentally friendly option in the automotive market.

PHEVs, however, are not as attractive from a tax perspective. While they are still significantly cleaner than traditional ICE vehicles, their use of fuel means they are subject to higher CO2 emissions. Ultimately, this means higher BiK tax rates and larger salary sacrifice contributions.

Exploring your options

For drivers looking for the most cost-effective option, there are some clear advantages when choosing an EV over a PHEV. However, it is important to consider other factors when making your decision, such as range, battery life, charging times, journey type and driving style.

Because a plug-in hybrid car will typically start in electric mode, you could find that you do not need the engine to complete short trips. With the average UK car trip being no more than 10 miles, a plug-in hybrid is likely to remain on electric power more often than not. The engine is there for longer trips.

Think of PHEVs as a potential stepping stone towards a fully electric future. These hybrids offer the perfect opportunity to test drive the advanced EV technology, assess its compatibility with your needs, and enjoy some attractive tax benefits in the process.

Deciding between an EV and a PHEV

Deciding between an EV and a PHEV isn’t just about comparing CO2 emissions or BiK tax rates – it’s about envisioning a greener future that combines advanced technology, convenience, and environmental responsibility. It’s about choosing a vehicle that fits not just your budget, but also your lifestyle and values.