Hybrid tax bombshell

  • Company car tax on certain hybrids to rocket
  • Government removes 2% tax discount
  • Lexus LS600h hit by £3,000 per annum rise

Certain hybrid cars are going to cost much more in company car tax thanks to a change in the way the Government treats them.

From the 2011/12 tax year, hybrids will lose the 2% benefit-in-kind discount they currently enjoy. Coupled with a tightening of the company car tax bands, the changes could amount to thousands of pounds a year in extra taxation.

Among the biggest losers tax-wise will be drivers who have opted for hybrids such as the Lexus range - GS450h, RX450h and LS600h models.

The driver of a GS450h currently pays benefit-in-kind tax based on 21% of the car's P11D value. This includes the 2% discount, which will continue to apply in the 2010/11 tax year. However, as the emissions bands tighten, company car tax will be based on 22% of the P11D price next year.

But in the 2011/12 tax year, when the 2% discount ends, the tax will be based on 25% of the P11D value, rising to 26% in 2012/13.

Today, a 40% tax-paying driver will be paying £3,425 a year in company car tax, but by 2012/13 this will have risen to £4,250 per annum. These figures also assume that the P11D price remains static for the next four years.

It's a similar story for the Lexus RX450h, which is currently taxed at 15% of P11D value. This rises to 16% in 2010/11, 19% in 2011/12 and 20% in 2012/13.

As a result, company car tax for a 40% taxpayer will rise from £2,580 a year now to £3,440 in 2012/13.

And in the LS600h, company car tax rises from the 29% banding now to 32% in 2010/11, rising to 33% and then 34% in 2012/13. Coupled with the abolishing of the £80,000 ceiling price in 2011/12, this spells a massive increase for the £90,000 plus saloon, from £9,280 a year now to £12,295 per annum in 2012/13. Or an extra £250 a month.

Even much lower emission hybrids will suffer. Honda's Civic IMA will be taxed at 10% of P11D until the 2012/13 tax year, when it rises to 12%. A 20% tax-payer's bill will rise from £372 a year now to £447 in 2012/13.

The same is true of Honda's other hybrid, the Insight, which also remains at 10% until moving to 11% in 2012/13, resulting in a tax billfor a base rate taxpayer increasing from £325 per annum to £357.

Only the Toyota Prius, with its sub-100g/km of CO2 emissions, remains in the 10% tax banding, costing a 20% taxpayer £388 a year.