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PHEVs face stricter emissions tests in 2025

17th January 2025

Plug-in hybrid electric cars (PHEV) will be subjected to stricter emissions tests in 2025 to better represent real-world use cycles. It’s thought the changes could have significant implications for company car drivers, with some models expected to see big jumps in tax bands, which are based on CO2 emissions.

As of current, tax rules state that cars that emit less than 50g/km of CO2 are divide into bands based on their zero-emission driving distance.

Most PHEVs are in this category and attract a 5%,8% or 12% Benefit in Kind (BIK) rate. However, if the emissions go beyond 50g/km drivers will face a BIK rate of at least 15%.

The revised emissions standard, known as Euro 6e-bis, applies to all newly launched PHEVs from 1st January 2025 and models on sale from December 31st. This means that all existing PHEV models will have to be re-homologated before the end of 2025, and company tax will be based on the figure that applies from the car’s production date.

Drivers who already have PHEV models will not be affected by the changes. However, those who have ordered new cars in 2025 may see an increase in their vehicles BIK rate if it has been re-homologated between the point of order and delivery.

 

When determining the official CO2 emission value of PHEVs, CO2 are measured in two operating modes:

  • 1. Driving with a fully charged battery until depletion
  • 2. Driving with an empty battery

The measured CO2 emissions are then weighted using a utility factor (UF), which depends on the range a PHEV can cover in battery depleting operation.

In 2023, as part of the Euro 6e regulations, the European Commission made adjustments addressing the criticisms that the previous testing regime did not adequately reflect real-world usage. Therefore, under Euro 6e the UF was 800km (497 miles), for Euro 6e-bis the UF has risen to 2,220km (1,367 miles).

Moreover, only brand-new cars will be affected by the updated emissions standards; there are no plans to backdate the bandings for existing company car users. This contrasts with the proposed introduction of Vehicle Excise Duty (VED) road tax for electric car drivers due later this year, which will be applicable to both new and existing electric vehicles.

How big of an impact will the changes have?

To illustrate how the revised UF curves affect the official CO2 emission values of PHEVs, the International Council on Clean Transport (ICCT) analysed the effect on a BMW X1 xDrive25e PHEV.

The vehicle can drive a distance in charge depleting operation of about 70km (43 miles).

Using the current UF curve, this results in an official CO2 emission value of approximately 45g/km.

When applying the Euro 6e-bis UF, the CO2 emission value of the X1 will almost double to 96g/km.

As a result, the BIK rate for the X1 would increase from 8% to 24%.

In 2027, further changes will see the UF increase to 4,260km (2,647 miles). At this point, the X1's emissions would increase to 122g/km, according to the ICCT.