Choosing between a pure electric vehicle (BEV) and a plug-in hybrid (PHEV) as a company car has never been a purely technical decision — it is fundamentally a tax decision. For the 2026/27 tax year, the gap between the two has widened further. A zero-emission BEV sits at just 4% BIK, while most PHEVs land between 9% and 15% depending on their certified electric range. Factor in the Euro 6e-bis testing shake-up and the flat 18% PHEV rate arriving in 2028/29, and the financial case for going fully electric is now overwhelming.
This guide breaks down exactly how electric vs hybrid company car tax works in 2026/27, walks through a real pound-for-pound comparison, and explains why PHEVs are rapidly losing their tax advantage.
BEV Company Cars: 4% BIK in 2026/27
Battery electric vehicles with zero tailpipe CO2 emissions attract the lowest BIK percentage of any vehicle type. For 2026/27, that rate is 4%.
The calculation is straightforward. Take the car’s P11D value (list price including VAT and options, excluding registration fee and VED), multiply by the BIK percentage, and tax the result at your marginal income tax rate.
Example — £40,000 BEV:
- P11D value: £40,000
- BIK percentage: 4%
- Taxable benefit: £40,000 × 4% = £1,600
- Tax at 20% (basic rate): £320/year
- Tax at 40% (higher rate): £640/year
That 4% rate applies to every fully electric car regardless of battery size, range, or manufacturer. Whether you choose a Nissan Leaf or a Tesla Model 3, the BIK percentage is identical. The rate then rises by 1% per year — 5% in 2027/28, then 7% in 2028/29, and 9% in 2029/30 — but remains dramatically lower than any combustion alternative.
For a deeper dive into the EV-specific advantages including salary sacrifice and 100% First Year Allowances, see our electric company car tax guide.
PHEV BIK Rates: 6–15% Based on Electric Range
Plug-in hybrids emitting 1–50 g/km of CO2 are taxed according to their WLTP zero-emission electric range. The shorter the range, the higher the BIK percentage. For 2026/27, the bands are:
| Electric range | BIK % (2026/27) | Annual tax on £40k car (40% taxpayer) |
|---|---|---|
| 130+ miles | 4% | £640 |
| 70–129 miles | 6% | £960 |
| 40–69 miles | 9% | £1,440 |
| 30–39 miles | 13% | £2,080 |
| Under 30 miles | 15% | £2,400 |
Most popular PHEVs on the market — models like the BMW 330e, Mercedes C300e, and Volkswagen Golf GTE — have WLTP electric ranges between 30 and 55 miles. That places the majority of them squarely in the 9% to 13% bands, resulting in BIK tax bills two to three times higher than a comparable BEV.
A PHEV with a genuine 130-mile-plus electric range would match the BEV’s 4% rate, but vanishingly few models currently achieve that figure. In practice, the “best-case PHEV” for most company car drivers is the 40–69-mile band at 9% — still more than double the EV rate.
Euro 6e-bis: Why PHEV Figures Are About to Get Worse
From April 2026, the UK adopts the Euro 6e-bis emissions testing standard. This is the single biggest change affecting PHEV company car tax, and it works against hybrids.
Under the current WLTP test procedure, PHEVs are tested with a fully charged battery. The electric portion of the test cycle drags down the overall CO2 figure dramatically — often to single digits. Euro 6e-bis extends the test distance from roughly 500 miles to over 1,350 miles and requires more of the test to be completed on the combustion engine. The result is that official CO2 figures for many PHEVs will double or triple.
A PHEV currently rated at 12 g/km could see its official figure jump to 40–80 g/km under Euro 6e-bis. If that figure exceeds 50 g/km, the vehicle drops out of the range-based PHEV bands entirely and is taxed purely on CO2 — potentially at 20% or higher.
The Government Easement (2026–2028)
To avoid a sudden tax cliff-edge, HMRC has introduced a temporary easement. PHEVs type-approved to Euro 6e-bis and registered between 1 January 2025 and 5 April 2028 can use a nominal CO2 value of 1 g/km for BIK purposes, regardless of their actual Euro 6e-bis rating. This keeps them within the range-based bands shown above.
However, this is a stopgap. The easement expires in April 2028, at which point all PHEVs emitting 1–50 g/km will be placed in a flat 18% BIK band (rising to 19% in 2029/30) — regardless of electric range. That represents a massive jump from today’s 9–15% and makes the long-term PHEV outlook significantly less attractive.
Head-to-Head: £40,000 BEV vs £40,000 PHEV
To make the comparison concrete, let us compare two similarly priced company cars over the 2026/27 tax year.
| BEV (e.g. Tesla Model 3) | PHEV (e.g. BMW 330e, ~40 mi range) | |
|---|---|---|
| P11D value | £40,000 | £40,000 |
| CO2 emissions | 0 g/km | 1 g/km (easement) |
| BIK percentage | 4% | 9% |
| Taxable benefit | £1,600 | £3,600 |
| Tax at 20% | £320/year | £720/year |
| Tax at 40% | £640/year | £1,440/year |
| Annual saving (BEV) | — | £400–£800/year |
Over a typical four-year company car cycle, a higher-rate taxpayer saves £3,200 in BIK tax alone by choosing the BEV. That figure grows further when you factor in lower fuel costs (electricity vs petrol), zero VED for the first year, and the employer’s 100% First Year Allowance on the purchase price.
For the complete BIK rate table across all CO2 bands, see our company car BIK rates guide for 2026/27.
When a PHEV Still Makes Sense
Despite the numbers favouring BEVs, there are a handful of scenarios where a plug-in hybrid may still be the pragmatic choice:
- No home charging. If you cannot install a home charger and lack reliable workplace charging, a PHEV removes range anxiety while still offering a lower BIK rate than a pure petrol car.
- Very high annual mileage. Drivers regularly covering 30,000+ miles per year on motorways may find current BEV ranges insufficient without frequent charging stops. A PHEV with a long electric range can handle urban commutes electrically and switch to petrol for motorway runs.
- Short-term lease ending before 2028. If your lease expires before the easement ends, you lock in the current range-based rates without facing the 18% flat rate.
- Transitional fleet policy. Some employers use PHEVs as a stepping stone, giving drivers experience with plug-in technology before moving the entire fleet to BEV.
Even in these cases, the gap is narrowing. Rapid charging infrastructure across the UK is improving fast, and BEV ranges of 250–350 miles are now common in the mid-range market. For most company car drivers, the tax arithmetic strongly favours a full EV.
The Bottom Line: BEV Wins on Tax, and the Gap Is Growing
The electric vs hybrid company car tax comparison for 2026/27 is unambiguous. A BEV at 4% BIK costs a fraction of even the best-placed PHEV, and the trajectory only gets worse for hybrids. Euro 6e-bis is exposing the gap between laboratory and real-world PHEV emissions, the Government easement is temporary, and from 2028/29 every PHEV faces a flat 18% rate regardless of electric range.
For company car drivers and fleet managers weighing up their next vehicle, the message is clear: go fully electric if your circumstances allow it. Whichever route you take, accurate mileage records matter — HMRC may request evidence of business versus private use, and if you claim the Advisory Electricity Rate (AER) for home charging, you will need a reliable journey log. Tripbook records every journey automatically using GPS, categorises trips as business or personal, and generates HMRC-ready reports. For PHEV drivers, Tripbook’s detailed journey data can also demonstrate how much driving is done on electric power versus petrol.
Download Tripbook from the App Store to start logging your company car journeys today.
For more on salary sacrifice schemes and how they interact with EV BIK rates, see our salary sacrifice vs buying guide.
