Plug-in hybrid cars (PHEVs) have been under attack recently, following a period in which they appeared to be growing in popularity as a viable option for particularly fleet drivers not yet convinced that fully electric is the way to go.
The past year, however, has seen a host of legislation denting the enthusiasm for PHEVs and leading fleet managers, and their employees, to hesitate in making the switch.
In last October’s Budget, the Government announced plans to drop the current criteria used to calculate Benefit-in-Kind (BIK) tax for plug-in hybrids emitting CO2 levels of under 50g/km. This currently sets the tax rate based on the amount of miles the car can complete in zero-emission mode, in other words under electric power only, with the rate currently (in 2025-26) ranging from 9 to 15%.
The change, set to take effect from the 2028-29 tax year, will see the BIK rates for PHEVs start at 18%, doubling the tax take for some drivers and making such plug-in models much less attractive than they have been up to now.
Test cases
Those understandably hesitating to choose a PHEV due to these changes have since been served further discouragement, due to changes in the way these plug-in models are emissions-tested. These will see the adoption of the latest European emissions standards as the criteria for calculating BIK tax rates for PHEVs.
In the UK the criteria has until now been based on Euro 6d emissions standards, but they are set to change to the Euro 6e-bis standard which is already in use in Europe, including Northern Ireland. And these changes are planned to happen not in three years time but next April.
Put simply, the new European Union regulations are based on a much stricter emissions test, resolving something anyone involved in cars has always known about plug-in hybrids – their official efficiency figures mean virtually nothing in real-world use.
The fact that PHEVs have electric motors that can power the car for a certain number of miles, typically around 40 to 60, have resulted in the laboratory-based testing criteria declaring official CO2 emissions levels for such cars as low as 10g/km, and fuel economy figures from the engine routinely vastly exceeding 100mpg.
The problem is, the current test criteria assumes that drivers will plug in their cars and recharge them all the time, thus relying a lot more often on electric power than is actually the case – in fact most PHEVs spend the majority of their time powered by their engine and consequently their average emissions and economy figures are much closer to those of a traditional petrol or diesel car.
The new test criteria goes a long way to rectifying this anomaly but in the process is set to have a major effect on BIK rates for PHEVs – under Euro 6e-bis, a typical car currently rated at 8% for BIK could increase to as much as 24%.
Thankfully, the Government appears to have belatedly realised that completely killing the plug-in hybrid market will likely harm its desired drive to net zero.
Such cars can have a major role to play in the fleet market, especially among the sizeable number of company car drivers who rack up long average daily mileages and either cannot or don’t want to factor in downtime recharging an electric vehicle – if PHEVs become less attractive such drivers will likely buy another petrol or diesel car for now rather than switch to an full electric vehicle.
So it has now been announced that the Department of Transport will launch a consultation on the proposals to adopt the Euro 6e-bis standard in the UK, with the aim of introducing legislation to reduce the resultant tax hike.
Treasury Minister James Murray told the House of Commons that the Government realised the role company cars will play on the road towards zero-emissions motoring.
“Subject to consultation outcome, the Government intends to legislate for an easement that will apply UK-wide between April 2026 and April 2028 to help mitigate the benefit-in-kind tax impact,” he said.
Clarity needed
So where does that leave us? To be honest, no less confused, and as a result still hesitant. According to the Government the consultation will be launched “in due course” so we don’t know when it will happen, what the results will be, and whether at least for the next three years plug-in hybrids will be worth buying.
Paul Hollick, chair of the Association of Fleet Professionals, argues that increasing tax on company cars beyond the levels announced in the Budget would be unfair, and shares the concerns over timing.
“We hope the situation is resolved as quickly as possible – many fleets and drivers have understandably been holding back from ordering PHEVs until they know what they will be paying,” he said.
“Given that the new legislation will take effect in April 2026, which is not necessarily that far away in terms of placing car orders, a speedy resolution would make sense,” he added.
So the answer posed to the question in the heading – for now, wait…
Andrew Charman is industry and road test correspondent at Business Motoring
