Company car drivers will face higher plug-in hybrid BiK rates starting in 2025, as the emissions calculations are being radically overhauled.
Considerable cost hikes
Since the resulting figure forms part of the equation for how much tax a company car driver must pay, the cost implications are likely to be considerable.
The emissions for a plug-in vehicle have always been calculated based on 6e emission standards tests which simulate 800km (497 miles) of driving but models launched from 1 January 2025 onwards will be subject to new tests called the Euro 6e-bis standard, which test journeys up to 2,200km (1,367 miles).
A PHEV is generally driven in fully electric mode for the first part of a journey then more of less fully in traditional fuel mode (ICE) for the remainder, resulting in a severely skewed figure when only a very limited number of miles are assessed. In reality, once the battery is drained a plug-in hybrid is no more efficient than an ICE vehicle.
Emission figures could double
The new emissions tests are more accurate due to the increase in miles they are being performed across. Better reflecting how PHEVs perform in real life, some drivers will see the current emissions figures for their PHEV vehicles double.
The International Council on Clean Transport (ICCT) said: “Over the past several years, it has become evident that the currently used UF curve does not reflect the real usage of PHEVs resulting in unrepresentatively low official CO2 emission values.”
From January 1, 2025, new and existing PHEVs will be subject to the more rigorous emissions testing and at the end of the year this will include all cars on sale, meaning existing models will have to be retested in order to comply.
The International Council on Clean Transport (ICCT) analysed the performance of a BMW X1 xDrive25e under the revised conditions to illustrate their impact.
The example of the X1...
The X1’s emissions figures rise from around 45g/km, to 96g/km and a huge leap from its Benefit-in-Kind company car tax banding of 8 per cent to 24 per cent under the new 6e-bis tests, on a par with the more efficient pure petrol models.Most PHEV models currently attract a 5%, 8% or 12% benefit-in-kind (BiK) rate.
A further change in emissions standards is anticipated in 2027, when ‘Euro 6e-bis-FCM’ comes into existence. Under the 2027 parameters, tested over a total distance of 4,260km (2,647 miles), the same BMW’s emissions would increase to 122g/km, according to the ICCT.
Only cars bought brand new will be affected and there are no plans to backdate the bandings for existing company car users as things currently stand but those ordering new cars this year may see an increase in the car's BiK tax rate between order and delivery if this is the point when the vehicle is reassessed.
It's a further setback for PHEVs that have already been recently hit by news of higher company car tax thresholds from 2028 in October's budget.
Vehicles with CO2 emissions of 1g to 50g per kilometre will have appropriate percentages of 18% in 2028/29 and 19% 2029/30. For a PHEV capable of up to 69 miles zero-emission driving, that will mean a seven percentage point year-on-year increase in BIK.
By making PHEVs less attractive, the expected downturn in plug-in hybrid demand is anticipated to bolster the move towards fully electric vehicles.