Many businesses across the UK have Plug-in Hybrid Electric Vehicles (PHEVs) on-fleet, often providing a highly effective bridge between their traditional petrol and diesel alternatives and the rapidly growing electric vehicle sector.
If you are running PHEVs on-fleet, then 2025 is an important year, regulatory changes have been updated in the shape of new emissions testing standards, with impacts on company car tax and compliance.
Businesses operating fleet vehicles need to understand and prepare for these material changes across Benefit-in-Kind (BiK) rates, vehicle compliance, and broader fleet costs.
In this article, we’ll cover:
- PHEV re-testing
- PHEV BiK rates
- Your fleet need-to-knows
- Taking action
Why Are PHEVs Being Retested?
As more data about PHEV emissions become available, their initial USP of combining the efficiency of an electric vehicle with the backup of a petrol engine for longer distances has become less accurate and appealing.
PHEV CO2 emissions are greater than previously thought, with lab testing pointing to an increasing gap compared to on-the-road, real-world driving conditions.
Enter the development of a new testing standard Euro 6e-bis, mandatory for all new PHEV models from 1st January 2025. Crucially, all existing PHEVs have until 31st December 2025 to re-test their emissions to remain road legal and tax-compliant.
Emissions testing changes - explained
First and foremost, it’s about distance - the previous Euro6e standard put vehicles through their paces over 800km, the new Euro 6e-bis more than doubles that distance to 2,200km, recognising that many high-mileage PHEVs spend less time in electric-only mode than previously assumed.
As a result, 50g/km CO2 emission threshold comes into play, significantly affecting BiK tax rates – the BMW X1 xDrive25e is a great example here.
Note, BiK rates are subject to change. As of July 2025, BiK rates for the BMW X1 xDrive25e are 9% and 25%
PHEVs and BiK rates – what’s the impact?
The impact is significant, and it’s related to where PHEVs sit on the low-emission scale. The current BiK rates system reward slow-emission and long electric-range vehicles, which, pre-Euro 6e-bis, looked favourably upon PHEVs. That’s now changed, with PHEVs likely to align more closely with petrol or diesel vehicles in their BiK treatment, nullifying their previous tax advantage.
You fleet need-to-knows
These changes matter, and they're not insignificant for fleets. Here’s our top three need-to-knows.
1. Your costs will rise
Higher BiK means higher Class 1A National Insurance Contributions for employers and greater tax liabilities for your drivers.
2. The time for electric vehicle adoption is now
The typical myths about EVs are falling away. Battery range is increasing, the selection of makes and models is on the rise, the charging infrastructure is rapidly expanding, and BiK rates, locked at 3% from April 2025, are favourable. Now is the time to double down on your EV transition strategy.
3. PHEV testing time is not on your side
PHEVs registered before 2025 must pass Euro 6e-bis testing by end of 2025, introducing the risk of vehicle downtime and admin costs for fleet teams.
Your fleet strategy, what’s next?
We work with customers daily to work through the PHEV viability challenge, and there are steps that you, as the fleet operator, can quickly take to minimise the impact to your business, including:
- Review your fleet mix: Assess which vehicles are most likely to be affected by retesting and develop a plan.
- Model BiK and NIC cost scenarios: How will costs look post-2025? Calculating now will help avoid unexpected tax exposure.
- Think EV: The value, primarily through a Total Cost of Ownership comparison, has never been more favourable for electric vehicles, and the infrastructure is strengthening daily.
- Consider electric vehicle salary sacrifice: Blended approaches combining your standard approach to leasing business vehicles with new models such as EV salary sacrifice will give your company and your drivers greater flexibility over your fleet.
We’re here to help
The world of PHEVs and fleet vehicles, more generally, is constantly shifting, and it can be overwhelming, especially when there are significant tax and compliance implications.
From fleet policy development, to compliance-related guidance and electric vehicle adoption, we’ve got the expertise to ensure your fleet is tax efficient, emission compliant and future proof.
We’re only a few clicks away, get in touch, and let us help build your PHEV management strategy.
Looking for more information to supercharge your company's EV adoption journey? Let’s start with some myth-busting.
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