For years, plug-in hybrid vehicles (PHEVs) have often been considered to offer the best of both worlds electric power for short commutes and petrol or diesel for longer journeys. They’ve been a go-to choice for drivers concerned about range anxiety and for businesses seeking lower Benefit-in-Kind (BiK) rates without going fully electric.
But that balance is shifting fast. With new emissions testing rules and revised company car tax bands arriving in the next two years, both drivers and fleet managers must prepare for major changes.
What’s Changing for Plug-In Hybrids
The Euro 6e-bis Emissions Standard
From April 2026, the UK will adopt the Euro 6e-bis emissions standard, already implemented in the EU and Northern Ireland. All PHEVs will need to be retested and re-homologated by the end of 2025. The new test cycle better reflects real-world driving behaviour, and that could spell trouble for many hybrids.
Key Differences in the New Tests
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Longer test distance: Expands from 497 miles to 1,367 miles, offering a more realistic mix of urban and motorway driving.
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Tougher “utility factor”: The test assumes less time in electric mode and more reliance on the petrol or diesel engine.
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Further tightening in 2027: Under Euro 6e-bis FCM, the test distance doubles again to 2,647 miles, likely pushing CO₂ figures even higher.
The goal is to make CO₂ ratings mirror real-world use but the reality is that many PHEVs could see their emissions double or even triple, drastically increasing their BiK rate.
Real-World Example:
This jump effectively erases the tax advantage PHEVs once offered making some models as costly to tax as petrol or diesel equivalents. In comparison EVs, retain lower BiK rates, increasing to just 9% in 2029/30.
BMW X3 30e xDrive M Sport
P11D £59,995 | 52miles electric range
| Annual BiK 2026/27 | ||||
|---|---|---|---|---|
| Test Standard | CO₂ Emissions (g/km) | BiK Rate (2026/27) | 20% Tax Rate Payer | 40% Tax Rate Payer |
| Old Euro 6e | 22 g/km | 10% | £1199.90 | £2399.80 |
| Euro 6e-bis (2026) | 64 g/km | 19% | £2,279.81 | £4,559.62 |
BMW iX3 345kW xDrive50 M Sport 113kWh 5dr Auto
P11D £61,189.99
| Annual BiK 2026/27 | |||
|---|---|---|---|
| CO₂ Emissions (g/km) | BiK Rate (2026/27) | 20% Tax Rate Payer | 40% Tax Rate Payer |
| 0 | 4% | £489.52 | £979.04 |
The tables above show that by switching from a plug-in hybrid BMW X3 to the fully electric iX3, company car drivers could save between £1,790.29 and £3,580.58 per year in Benefit-in-Kind (BiK) tax alone, in 2026.
A Temporary Transition Period
To ease the shift, the government will introduce a two-year easement from April 2026 to April 2028. This grace period allows manufacturers and fleet operators time to adapt vehicle selections and manage financial exposure.
Find out more with our BiK table
What This Means for Your Fleet
PHEVs Are Losing Their Tax Advantage
From the 2028/29 tax year, all PHEVs emitting 1–50 g/km of CO₂ will be placed in an 18% BiK band, regardless of electric range rising to 19% in 2029/30.Vehicles that record higher emissions during re-testing will move up tax bands accordingly, meaning employees could face higher BiK payments on existing company cars and salary sacrifice vehicles.Vehicle Excise Duty (VED) also aligns with petrol and diesel models, removing previous tax savings for plug-in hybrids.
EVs Continue to Lead
Electric vehicles remain the most tax-efficient option. Their BiK rate will stay at 3% in 2025/26, gradually increasing to 9% by 2029/30.EVs also benefit from:
- A £10 first-year VED rate (until 2029/30)
- Lower running and maintenance costs
- Ongoing grants and incentives for both drivers and employers
Salary Sacrifice: What’s Changing
PHEVs emitting over 75 g/km of CO₂ may soon lose eligibility for salary sacrifice schemes. Even those that remain eligible will see reduced savings as BiK rates rise.By contrast, EV salary sacrifice schemes continue to deliver:
- Brand-new cars with no upfront costs
- Significant Tax and National Insurance savings
- Low, predictable BiK rates for employees
- Lower NI contributions and reduced grey-fleet risk for employers
Find out more about Salary Sacrifice with Lease Electric
Employee Car Ownership Schemes (ECOS)
From October 2026, vehicles provided under Employee Car Ownership Schemes will be treated as taxable BiK, effectively like company cars.A vehicle will be classed as “available for private use” and taxed accordingly if:
- Private use is restricted
- The employee isn’t the registered keeper
- There’s a buyback or onward-sale clause
Currently, many ECOS vehicles avoid BiK tax because ownership transfers to the employee and is taxed under loan rules. Under the new system, any qualifying ECOS will fall under standard company car rules, with tax based on CO₂ emissions and list price.This means that PHEVs currently benefiting from low BiK rates could face significantly higher tax charges within a year.
What Fleet Managers Should Do NextThe move to Euro 6e-bis marks a turning point in the UK’s road to electrification. While PHEVs may still have a role, their financial and environmental advantages are rapidly fading.For most fleets, now is the time to act to treat your EV strategy not just as a sustainability goal, but as a commercial necessity.
- Audit your PHEVs to assess the impact of new CO₂ figures.
- Model BiK scenarios to forecast tax exposure.
- Reassess fleet mix based on total cost of ownership and ESG goals.
- Update driver communications to explain changing vehicle choices.
- Optimise salary sacrifice schemes, prioritising EVs for long-term savings.
- Plan infrastructure upgrades to support EV adoption.
- Engage stakeholders early to ensure a smooth transition.
If you’d like help reviewing your fleet strategy, assessing risk or planning your EV transition, Lease Electric’s team is ready to support you.