Plug-in hybrid electric vehicles (PHEVs) were once marketed as the perfect middle ground: cleaner than petrol cars, more practical than early electric vehicles, and cheaper to run. With a rechargeable battery and a petrol back-up engine, they were supposed to offer “the best of both worlds”.
That promise is now looking increasingly shaky.
From 2028, the Government plans to introduce a pay-per-mile road pricing system. Under current proposals, plug-in hybrid drivers will be charged 1.5p per mile, on top of the fuel duty they already pay when filling up. This creates a potentially costly situation where PHEV owners are effectively taxed twice for the same miles.
Electric car drivers will also face a mileage charge (at a higher rate), but crucially they do not pay fuel duty. Traditional self-charging hybrids avoid the new mileage charge altogether. This leaves plug-in hybrids in an awkward middle position: paying fuel taxes like petrol cars, plus an extra mileage charge simply because they have a plug.
In practice, many PHEVs don’t even deliver the savings they were designed for. Most offer a limited electric-only range of around 15 to 60 miles. For drivers who cannot easily charge at home or work, or who face high public charging costs, the petrol engine ends up doing most of the work. Despite this, owners will still be charged on every mile driven, regardless of whether the car is running on electricity or petrol.
The timing of these changes could also hurt resale values. As buyers begin to factor in future road pricing, demand for plug-in hybrids is likely to cool. A flood of used PHEVs onto the market could push prices down, meaning current owners may face steeper depreciation than expected — often the single biggest cost of car ownership.
Company car drivers, who have historically benefited from generous benefit-in-kind (BIK) tax rates on plug-in hybrids, may also be caught out. These tax advantages are expected to reduce from 2028, further weakening the financial case for PHEVs versus other options.
Bottom line
Plug-in hybrids were designed as a stepping stone to a lower-emission future. Instead, they now risk becoming one of the most expensive and inefficient ownership choices from a tax perspective.
For anyone considering buying or keeping a PHEV, it is no longer enough to look at fuel savings alone. Rising taxes, uncertain future policy and potential drops in resale values mean the “best of both worlds” may quickly turn into the worst of both.
Before committing to a plug-in hybrid, it is worth carefully assessing total ownership costs and whether a conventional petrol, self-charging hybrid or fully electric vehicle may now make better financial sense.
Plug-in Hybrids: A Compromise That's Becoming Expensive
Fiona Davies
Financial Adviser
8th December 2025
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