How Will New EU Emissions Rules Affect Plug-In Hybrids in the UK?
If you drive a company car or manage a fleet, you’ve probably heard the buzz about upcoming changes to how plug-in hybrid vehicles (PHEVs) are taxed and rated for emissions. The European Commission’s latest standards are shaking things up, and the UK is carving its own path post-Brexit. But what does it all mean for you, your business, or your next car choice? Let’s break it down in plain English.
Why Are Plug-In Hybrids Facing Stricter CO2 Rules Across Europe?
Plug-in hybrids have long been the darlings of company car fleets, thanks to their low official CO2 figures and generous tax breaks. But recent studies have thrown a wrench in the works. Real-world data, including a 2022 analysis by the International Council for Clean Transportation (ICCT), revealed that PHEVs often emit far more CO2 in everyday driving than lab tests suggest—sometimes more than three times as much.
To address this, the European Commission introduced the Euro 6e-bis emission standard in January 2025. The key change? A new ‘utility factor’ that assumes PHEVs spend less time running on electric power and more on petrol or diesel. The outcome? Official CO2 ratings for these vehicles are set to jump, sometimes doubling or even tripling, without any physical changes to the cars themselves.
For example, a PHEV previously rated at 45g/km of CO2 could see its figure soar to 96g/km, and even up to 122g/km by 2027 as further adjustments kick in. That’s a seismic shift, especially for companies relying on these numbers to qualify for tax incentives.
What’s at Stake for UK Company Car Drivers and Fleet Managers?
Here’s where things get personal. In the UK, company cars emitting 50g/km CO2 or less fall into the lowest tax bands. Businesses can write off 100% of lease costs or 18% of purchase costs against profits. Go above that 50g/km threshold, and those perks shrink dramatically—down to 85% and 6%, respectively.
With the new EU testing regime, many PHEVs could lose their tax-friendly status overnight. That’s a big deal, considering more than 80% of new PHEVs in the UK are bought for fleets. For drivers, it could mean higher benefit-in-kind (BIK) tax bills. For businesses, it’s a potential hit to the bottom line.
How Is the UK Responding to These Changes?
Here’s the twist: the UK isn’t bound by the new Euro 6e-bis rules (except in Northern Ireland), thanks to Brexit. Recognizing the risk to fleet electrification and business incentives, the UK Treasury has proposed a two-year “easement” starting April 2026.
What does that mean in practice? Manufacturers will be allowed to keep using the older, more favorable Euro 6d CO2 figures for tax and reporting purposes, even if the same cars are rated higher in Europe. They can either stick with pre-2025 data or convert the new numbers back to the old standard.
This move is designed to give fleets and drivers some breathing room and certainty while the industry adapts. The final details will be hammered out after a public consultation, with legislation expected in an upcoming finance bill.
What Are Industry Experts Saying About the UK’s Approach?
Fleet professionals and leasing associations have largely welcomed the UK’s proposal, though they’re urging the government to move quickly. Paul Hollick, chair of the Association of Fleet Professionals, points out that PHEVs are already facing tax increases from April 2028, when all cars emitting 1-50g/km CO2 will be lumped into a single 18% tax band.
Hollick’s take: It wouldn’t be fair to pile on extra tax hikes before those changes even take effect. Many fleet managers are holding off on new PHEV orders until they know where they stand. Certainty, he argues, is crucial for planning and budgeting.
Thomas McLennan from the British Vehicle Rental and Leasing Association echoes that sentiment. Changing testing regimes and fluctuating CO2 figures create confusion, making it tough for companies to make informed decisions. While the UK’s easement offers some clarity, he warns that PHEVs could still face higher first-year vehicle excise duty (VED) and other tax impacts.
What Does This Mean for the Future of Plug-In Hybrids in the UK?
The big picture: PHEVs remain an important stepping stone for fleets and drivers not ready to go fully electric. They offer flexibility, lower emissions (when used as intended), and a way to meet environmental targets without range anxiety.
But the landscape is shifting. As real-world emissions data becomes more central to policy, the days of ultra-low tax rates for PHEVs may be numbered. The UK’s temporary easement buys time, but by 2028, the tax advantages will narrow, and fleets will need to weigh their options carefully.
For now, if you’re considering a PHEV for your business or as a company car, keep an eye on the evolving rules. Talk to your fleet manager or tax advisor, and factor in not just the sticker price but the long-term tax implications. The right choice will depend on your driving patterns, charging habits, and how quickly you’re ready to embrace full electrification.
The Bottom Line for Drivers and Businesses
Change is coming, but it’s not all doom and gloom. The UK government’s approach aims to keep plug-in hybrids attractive for fleets in the short term, while giving everyone time to adjust to a lower-carbon future. If you’re in the market for a new company car, stay informed, ask questions, and don’t be afraid to challenge assumptions. The road ahead may be uncertain, but with the right information, you can steer your business—and your wallet—in the right direction.