By Chris Joyce, managing director of Sogo mobility

With hybrid registrations up sharply in 2025, the technology’s popularity is clear. But as Benefit-in-Kind tax rates for plug-in hybrids rise from the 2027/2028 tax year, fleet managers must ensure lease terms align with these changes.

Hybrid vehicles have led the way in the UK’s transition to low-emission motoring. They have helped to bridge the gap between conventional combustion engines and full battery electric vehicles (BEVs). However, as the Government sharpens its fiscal tools to drive zero-emission adoption, the fleet sector now faces a crucial period of adjustment.

Fleet decision-makers should closely monitor contract timelines, particularly for plug-in hybrid electric vehicles (PHEVs). With Benefit-in-Kind (BiK) tax increases confirmed from 2027/2028, hybrids will soon lose much of their current fiscal advantage. Those signing new leases or salary sacrifice schemes today could find that what looks efficient in 2025 may become an expensive burden before the end of term.

The UK’s net zero commitments remain among the most ambitious globally, and fleets sit at the heart of that journey. According to the latest figures from the SMMT, PHEV registrations grew by 37.1% year on year, demonstrating sustained demand for transitional technologies. However, this momentum could stall as the Treasury’s tax roadmap makes hybrids progressively less attractive. From 2028/29, vehicles emitting between 1g and 50g/km of CO2 will see their BiK rates rise sharply.

A PHEV capable of 40 to 69 miles on electric power alone currently attracts a 9% BiK rate, rising to 10% in 2026/2027 and 11% in 2027/2028. However, that will leap to 18% in 2028/29, regardless of range. By comparison, all other bands will rise by just one percentage point per year over the same period, with the top rate hitting 39% by 2029/30.

The direction of travel is unmistakable. The Government wants to accelerate the move to full electrification, and the tax system is its primary lever. The question for fleet operators is not whether to follow suit, but when and how to manage the transition without incurring unnecessary cost.

Many fleets operate on traditional three- or four-year lease cycles – a structure that makes sense when the tax environment is stable. But with a major BiK shift just three years away, locking into a PHEV lease beyond 2027 could expose fleets to rising liabilities.

For instance, a driver choosing a PHEV in 2025 under a four-year agreement could face a seven-point BiK increase before handing the keys back. For organisations offering salary sacrifice schemes, this could translate into higher costs for both the employer and the employee. For drivers, the difference in monthly tax could be substantial, particularly on premium vehicles with emissions sitting just below the 50g/km threshold.

Fleet managers should therefore review the end dates of hybrid contracts now. Aligning them with the 2028/29 tax year, or ideally a year earlier, provides flexibility to pivot towards BEVs as the fiscal landscape evolves.

At Sogo, we have long championed the shift to net zero. Businesses need support to trial new models, respond to driver feedback and align fleet strategy with real-world infrastructure and charging progress. It turns the fleet from a fixed cost into a strategic asset and one that evolves with market and regulatory change.

Driver expectations are also changing, with company car users increasingly tax-aware and environmentally conscious. They want choice and reassurance that their employer can manage shifting BiK rates or lifestyle needs. Offering the ability to transition from a hybrid to a BEV, or to choose models that minimise tax exposure, could become a key differentiator in recruitment and retention.

For fleet managers, flexibility isn’t just about tax management; it’s about people management. A responsive car policy sends a clear signal that the organisation understands its employees’ financial realities and is serious about sustainability.

For fleets, the challenge is to navigate the final leg of the hybrid era without missteps. It means reviewing contract lengths, reassessing whole-life costs and ensuring that today’s procurement decisions do not compromise agility tomorrow.

The businesses that succeed will be those that plan their hybrid exits carefully by synchronising contract end dates with BiK change points and keeping pathways open for BEV adoption.

In short, flexibility isn’t just an operational advantage; it’s a fiscal imperative. With 2028 fast approaching, fleets that act now to align hybrid contract terms with the tax calendar will be best placed to maintain cost efficiency, support drivers and stay on course for net zero.