Why the UK's delay on Euro 6e-bis leaves fleets in the firing line

Yahoo

26-06-2025

With the Euro 6e bis emissions standard now in force across Europe as of January 2025, the UK is expected to follow suit in January 2026 - though no formal decision has yet been announced. The headline implication is higher official CO₂ emissions for plug-in hybrid vehicles (PHEVs), which will influence taxation and reshape the market for fleet operators, company car drivers and OEMs. However, if government decision-makers don't officially confirm the pivot to the new standard, it could disrupt several other critical aspects.
As drivers, leasing companies and employers wait with bated breath, Matt Walters, Head of Consultancy and Customer Value at Ayvens, offers insight into the technical shifts of the new testing standard – and why the timing of the announcement is a critical element for preparing stakeholders for change.
At its core, the new testing regime changes how vehicle CO₂ ratings are calculated, with some PHEV models seeing their figures double - or even triple. This has major implications for tax categorisation. Data from Ayvens' 2025 Tax and Funding Guide illustrates how such steep increases could translate into significant additional costs for businesses and employees alike.
Currently, companies can cut their tax bills by nearly half over a typical 48-month lease (2025–2029) by choosing a PHEV over a petrol alternative, thanks to lower emissions ratings. A substantial revision to those figures under the new standard could mean thousands of pounds in additional tax over the same period.
Zooming in further, many vehicles that currently qualify as 'leased low-emission cars' -defined as emitting 50g/km of CO₂ or less - may no longer meet the threshold for 100% corporation tax relief. The same risk applies to vehicles leased through salary sacrifice schemes. Today, cars emitting up to 75g/km are taxed as company cars at ultra-low rates. That advantage may soon disappear if those vehicles breach the emissions ceiling.
Beyond the main implications, Euro 6e bis introduces some other specific challenges. Companies deducting their leasing costs from taxable profits are subject to a flat 15% restriction on vehicles that emit over 50g/km CO₂. Under the new standards, many leased PHEVs will again cross the threshold, turning what was a fully deductible business expense into something more costly.
Additionally, leasing companies face complications regarding capital allowance pools which may affect pricing and leave leasing firms financially exposed. Because the transition in testing standard is yet to be formally confirmed by government, leasing companies are currently quoting vehicles at a particular price point that is reflective of the anticipated tax relief that comes with the leasing of a low-emission vehicle (tax relief over a five-year period, rather than a thirty-year period).
On an individual level, there's the risk of unequal treatment among company employees due to the regulatory change. For example, one employee may be using a vehicle they obtained through salary sacrifice under current standards, but if another employee attempted to do so through the scheme under the new standard in a years' time, they may well find the same car to be ineligible for that scheme as it now sits outside the emissions threshold.
How can leasing companies mitigate and work around the challenges posed by the impending change to testing standards?
If we're to assume that there'll be no movement from the government on the change in testing standards prior to the summer recess (end of July), leasing companies will have no choice but to adapt to the changing landscape. To protect their customers amid the current instability, Ayvens is accounting for these potential changes in their quotes moving forward and is being cautious about extending order banks into January.
It's also an opportune moment to develop contingency plans in case of a sudden change in momentum from the government, and maintaining a transparent line of communication with customers is important to avoid any discord and stay clear of becoming financially exposed. Ultimately, the interconnected nature of these tax implications makes adaptation difficult, but until there's legislative clarity and a defined timeline, the industry must work around the issue.
"Why the UK's delay on Euro 6e-bis leaves fleets in the firing line" was originally created and published by Motor Finance Online, a GlobalData owned brand.
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