Fleets must adapt to manage the rapidly evolving tax and legislative landscape. Lee O’Connell, sales director at Sogo Mobility, explores the challenges and opportunities.

Lee O’Connell, sales director at Sogo Mobility

The fleet world is no stranger to change. Whether it’s evolving technologies, shifting environmental goals, or fluctuating fiscal policies, fleet managers are constantly adapting. In the UK, recent government decisions around company car taxation underline how critical it is for fleets to remain flexible, especially during rapid legislative change.

The UK’s recent tax adjustments for plug-in hybrid vehicles (PHEVs) have highlighted the volatility of tax policies surrounding fleet choices. In the current financial year, the tax rate on PHEVs ranges from 2% to 14% of their official list price, depending on their zero-emission mileage capability. A PHEV that was capable of driving over 130 miles in electric mode would enjoy a favourable 2% tax rate, while those with an electric range of fewer than 30 miles are taxed at a hefty 14%.

However, this will shift dramatically by 2028/29, when PHEVs will no longer be taxed based on zero-emission mileage but on WLTP CO2 emissions. Under the new regime, PHEVs with emissions of 1-50g/km will face an 18% tax rate across the board.

This jump represents a significant financial burden for the many fleet drivers currently paying between 8% and 12% for their PHEVs. Contrast this with battery electric vehicles (BEVs), whose Benefit-in-Kind tax rates will rise modestly from 2% today to 7% in 202/29.

These policy shifts will have a profound impact on fleet strategies. The Association of Fleet Professionals (AFP) predicts a widespread reconsideration of company car choice lists. Drivers locked into long-term PHEV contracts may face an unwelcome tax surprise towards the end of their lease periods, likely prompting them to seek early termination options.

For fleet managers, this isn’t just a matter of adjusting tax calculators – it’s a challenge to ensure that fleet policies, leasing terms and vehicle choices remain nimble enough to adapt to these changes. Indeed, at the SMMT’s annual dinner, business secretary Jonathan Reynolds revealed that a fast-track consultation on the Zero Emission Vehicle (ZEV) mandate will be launched, which could alter the way automakers are penalised for failing to meet standards.

The future of fleet management lies in flexibility. Legislative and tax environments will continue to evolve, and fleet managers who fail to stay agile risk being caught off guard.

Long fixed-term contracts on vehicles, especially PHEVs, could leave businesses exposed to sudden tax hikes. Flexible and fixed short-term contract arrangements such as subscription services allow fleets to pivot quickly in response to legislative changes.

A shift from PHEVs to BEVs may seem inevitable, but the timing will depend on a company’s unique circumstances. By avoiding rigid fleet policies, managers can adapt their strategy to optimise both tax efficiency and operational needs.

As the UK government continues incentivising BEVs, businesses aligning their fleets with these goals can gain a competitive edge. Flexible vehicle procurement strategies allow a gradual and financially manageable transition to zero-emission vehicles.

Vehicle technology is advancing rapidly. From extended battery ranges to alternative green fuels, the market will continue to evolve. Fleet managers need the agility to incorporate new solutions without being tied to outdated contracts.

Adapting to change must also balance the need for responsible vehicle leasing, which is vital for companies striving to grow sustainably. For fleet businesses, adopting ESG practices contributes to global sustainability goals and enhances their corporate reputation and operational efficiency.

Emissions reduction requires a considered and holistic approach that includes BEVs, hybrids, and modern fuel-efficient petrol and diesel vehicles. If change is to be lasting, it must meet operational requirements. At Sogo, a data-led approach is taken to find the optimal balance across a fleet and use carbon offsetting for mileage from traditionally fuelled vehicles.

By choosing a flexible approach, fleet managers can focus on what truly matters: meeting business needs while staying ahead of legislative and tax changes. The future is uncertain, but with the right tools and strategies, it’s an opportunity.

In an era of constant change, flexibility isn’t just a luxury – it’s a necessity. The smart choice for fleet managers is to prioritise adaptability, ensuring they can weather the storm of legislative change.