April tax changes for fleets

It’s almost time for the new tax year, and there are two key things company car drivers need to know.

Vehicle Excise Duty (VED) – Expensive Car Supplement (ECS)

Firstly, some good news. From 1 April 2026, the threshold for the Vehicle Excise Duty Expensive Car Supplement (ECS) for zero-emission cars will increase. This is an additional payment on top of road tax (VED) for the first five years after the second licence, previously set at £40,000 or more for all cars. Recognising that many electric cars fell into this category, the Government has raised the threshold to £50,000.

The change applies retrospectively, meaning that most vehicles registered from 1 April 2025 will not be required to pay the charge. For existing leases, where the ECS cost has been included in the contract for vehicles with a list price between £40,000 and £50,000, customers should be refunded the ECS as it is no longer due

Incidentally, the standard rate of VED for new EVs registered remains fixed at £10 until March 2030. The standard rate of VED from the second year onwards will increase from £195 to £200 from 1 April 2026 until 31 March 2027.

Changes to PHEV taxation

Secondly, in the last Budget, the Government acted to shield company car drivers from the impact of new European emissions testing, which has major implications for the UK tax regime for drivers of plug-in hybrids (PHEVs)

We’re not talking about conventional hybrid cars here. These vehicles switch between petrol and electric power, cannot be recharged externally, and can only run on electric power at low speeds for a very short distance before the engine engages.

As the “plug-in” name suggests, PHEVs allow drivers to charge the battery themselves, and because they have a larger battery, they provide significantly more electric range. Current PHEVs start at around 30 miles electric-only, with the longest-range electric-only PHEV being the Omoda 9, which has an official 93-mile range.

The Benefit-in-Kind (BIK) rate for hybrids and PHEVs currently covers vehicles emitting 0–50g/km of CO2, classifying them as low-emission vehicles. The higher the electric-only range, the lower the BIK rate; for 2025/26, rates range from 15% for vehicles with less than 30 miles electric-only range, down to 6% for vehicles with 70–129 miles. The Euro 6e-bis emissions standard now changes this.

European regulators determined that current emissions testing for PHEVs assumed vehicles would be driven predominantly on electric power, but in reality, many drivers relied mainly on petrol and rarely plugged in.

The Euro 6e-bis emissions standard took effect in Europe in January 2025 for all new PHEVs.

Under Euro 6e-bis, CO2 figures increased. The new CO2 testing regime simulates a distance of 1,367 miles (2,200 km) instead of the previous 497 miles (800 km), and some PHEV models saw their figures double—or even triple, approaching the levels of pure petrol vehicles. In 2027, a longer mileage test, called Euro 6e-bis-FCM, is expected.

Don’t panic.

In the UK, the tax regime for electric, hybrid, and plug-in hybrid vehicles has been set until 2029/30. Great Britain has yet to adopt Euro 6e-bis, but while it has committed to aligning with Northern Ireland and the EU, it is implementing a pause—called a temporary easement—to mitigate the impact on PHEV company drivers.

If a vehicle was registered on or after 1 January 2025, has a CO2 emission figure of 51g/km or more (covering models introduced before then—new PHEVs are lower), has an electric range of 1 mile or more, and was registered under any emission standard other than Euro 6d-ISC-FCM or Euro 6e, the vehicle’s CO2 is deemed nominally 1g/km for employment tax purposes. This means the BIK charge will be based solely on the electric mileage range.

Any PHEV with CO2 emissions up to 50g/km already benefited from lower BIK rates based on electric mileage range, even before the easement, so there is no change for lower-emission PHEVs. The easement remains in place until 5 April 2028.

Beyond being aware of this, individual drivers will not need to take any action. The Government has stated that affected employers will need to report the nominal CO2 as set out in legislation, rather than the CO2 figure listed on the vehicle’s registration document. Employers record the changes through payroll.