The Treasury’s “easement” protecting plug-in hybrid drivers from incoming company car tax hikes has opened a loophole for the highest-emitting and most luxurious models, Autocar has learned.
New Euro 6e-bis emissions rules came into force across the EU on 1 January, including a new way of calculating CO2 emissions for PHEVs.
It assumes their electric driving accounts for a much lower share of real-world usage, which means mechanically unchanged vehicles will get a higher CO2 figure as manufacturers retest them to the new standard ahead of the 31 December deadline.
This creates a big challenge in the UK, where PHEVs’ low published CO2 emissions have created an 80% fleet-weighted market, according to Department for Transport data.
PHEVs emitting between 1 and 50g/km CO2 fall into one of five low company car tax bands – currently between 2% and 15% – according to their electric range, which offers cheap benefit-in-kind (BIK) tax bills for drivers.
For example, a 20% income taxpayer would pay £36 for a Volkswagen Golf eHybrid Match, compared with £151 for the equivalent petrol model.
The UK’s emissions rules have deviated from the EU’s since Brexit. Here manufacturers need to comply with only the older Euro 6d-ISC-FCM rules (which were in force when the UK left the EU), but most vehicles are designed to meet the current Euro 6e standard anyway, as it doesn’t significantly affect CO2 emissions.
However, Euro 6e-bis would have left manufacturers either retesting vehicles using older rules for the UK market or losing some of their tax advantages.
For example, Euro 6e-bis pushes the Vauxhall Astra Sports Tourer GS PHEV from 30g/km to 51g/km CO2 with no other changes, nudging it from the 13% tax band up to 16%. That would raise a 20% income taxpayer’s BIK tax bill from £5019 to £8532 over a three-year period – a £3522 increase.
To avoid this, the Treasury announced an “easement” during the summer, enabling manufacturers to convert Euro 6e-bis CO2 figures back to older standards or continue using older data, keeping affected vehicles under the 50g/km threshold until 5 April 2028.
The Budget proposed a slightly different process, where Euro 6e-bis-compliant cars will get a nominal 1g/km CO2 emissions figure if they emit more than 50g/km, offer at least one mile of electric range and were registered since 1 January 2025.
