Employers are being advised that some plug-in hybrid electric vehicles (PHEVs) ordered through salary sacrifice schemes may no longer qualify for the benefit due to stricter emissions testing.
Salary sacrifice allows employees to lease a vehicle through their employer, paying from pre-tax income, provided the vehicle emits 75g/km of CO₂ or less. However, the new Euro 6e-bis emissions test could significantly increase CO₂ values for some PHEVs, pushing them above the threshold.
In the EU, the Euro 6e-bis standard has applied to newly launched PHEVs since January 2025 and will cover all models on sale from December 31. The Department for Transport is expected to consult on adopting this standard in Great Britain, with potential implementation for all new cars and vans from 2026.
HM Treasury confirmed there will be no retrospective changes for registered vehicles. However, new CO₂ figures could push some PHEVs above 50g/km, increasing company car tax, or over 75g/km, making them ineligible for salary sacrifice tax benefits.
Tax experts haver warned that CO₂ figures on certificates of conformity may differ from expectations, while the Department for Transport provided estimates suggesting that a PHEV currently rated at 10g/km CO₂ could rise to 30-40g/km, while a 30g/km PHEV might increase to 60-90g/km.