Diesel-electric hybrid cars will not incur the 3% benefit-in-kind surcharge that applies to conventional diesel-powered cars.
Diesel-electric hybrids have now been incorporated in the type A tax band rather than the previous type D, which covers diesels but attracts a 3% levy on the Benefit in Kind (BIK) tax payment. This is likely to translate to a considerable saving for company car drivers, depending on the price of the vehicle.
The new ruling is because the extra 3% applies only to diesel cars, and a car with a hybrid system is no longer just a diesel. The new diesel hybrid tax clarification has come from HM Revenue and Customs (HMRC).
This means that cars such as the world’s first diesel-electric hybrid, the Peugeot 3008 HYbrid4, will benefit from a 10% threshold for personal BIK taxation rather than a 13% rate. This will also apply to forthcoming diesel-electric cars such as the Peugeot 508 Saloon and 508 RXH HYbrid4 – as well as Citroën DS5 Hybrid4 models.
For a company car driver, a vehicle such as the Peugeot HYbrid4 means low BIK, and for the company it means lower Employer National Insurance contributions, as well as an allowance for the company to offset 100% of the list price, in the first year, against its taxable profits.
The Volvo V60 Plug-in Hybrid, to be launched in 2012, will also benefit from the same rate. This means very low company car tax for vehicles that have low emissions yet high performance – 49 g/km CO 2
and 285 hp in the case of the Volvo V60.