Budget PHEV tax changes leave fleets with 'too many unknowns''

Topic: With PHEVs having to be re-calculated in terms of their CO2 emissions for cars bought from 2026 (subject to consultation in the UK), and with the new BIK tax treatment from April 2028, how does this affect your decision making with regards to having PHEVs on your fleet?

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The discussion at the February meeting of the Fleet200 Strategy Network focused on the lack of clarity around the rules on plug-in hybrid cars, among both fleets and manufacturers.

It appears that the date of implementation varies depending on whether manufacturers have adopted the EU WLTP emissions testing procedure or the UK-derived approach.

The EU policy will require retesting of PHEVs to be carried out this year with the new emissions resulted introduced for all new registrations from January 2026.

However, with the UK yet to announce its timelines, manufacturers following its testing regime believe implementation is likely to coincide with the 2028 date for the new BIK tax rules.

One fleet manager said: “There is no clear path so we can’t advise our drivers, and it is not clear what our policy should be.”

Uncertainly had led to several fleets removing PHEVs from their choice list already: “Too many unknowns,” said one.

Fleets also pointed out how the PHEV taxation changes from 2028 conflict with the ZEV Mandate and the proposed 2030 deadline on the sale of pure petrol and diesel cars, which allows a five-year transitional period until 2035 whereby PHEVs can still be sold.

“One Government department is taxing them off the road, while another is encouraging their adoption as a stepping stone to full electric until 2035,” said one fleet decision-maker.

Removing PHEVs as a viable company car option was resulting in two outcomes: some drivers were being pushed towards full electric, while others – where BEV was not a reasonable option either due to personal circumstances or job mileage requirements – were likely to opt for petrol or diesel.

“If we can’t go full electric, then we will have to go back to diesel,” said one utilities fleet manager, who also raised the possibility of a third option: employees opting out of the car scheme and becoming part of the grey fleet.

The main reason the EU has mandated the retesting of PHEVs is a belief that they spend far less time travelling in electric-only mode. Fleets believed this was an outdated view.

“Five years ago, when PHEVs could do 15-20 miles, this was the case because it wasn’t worth charging them up for several hours,” one fleet said. “But now with 40-50 miles, or even more range, plus rapid charging, all PHEV drivers charge them up and use electric for the majority of their driving.

“In addition, regen has also improved, so drivers can get even more range out of the car.”

Another said: “Technology advancements has resulted in a mindset change for drivers. But the legislation changes are behind the curve.”

Fleets also discussed whether drivers who had already ordered a PHEV on a four-year replacement cycle (essentially taking them to 2029), would look to cancel their order or even refuse to take a car when it was delivered.

“There has been no change to the vehicle itself, so we have no rights under the Consumer Act,” said one fleet.

One option being considered by fleets is to extend the operating cycle for PHEVs by a year or two to see drivers through the next few months of uncertainty.

“Five years on a car works as long as it’s properly maintained,” said one fleet manager. “We can show the driver the risk and what it means to their back pocket if they changed.”

Another said: “If residual values are hit or we have a disparity on the model year, then extending might help. Leasing companies are generally fine with extending; five years is not uncommon.”