Vehicle tax 2025 update

Author: Elena Barbara, Ayvens Consultancy

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.

This white paper provides a concise overview of these updates, helping global automotive managers anticipate their impacts.

Monitoring tax helps companies plan purchases, shape driver policies, protect employee value and align investments. In a fast-changing environment, not tracking tax changes risks impacting the companies’ fleet management, slowing the adoption of electric vehicles (EVs) and creating gaps in compliance.

2025 is a turning point in European fleet taxation. Policymakers are moving from broad subsidies to long-term tax measures that speed up zero-emission adoption while reducing preferential treatment.

Key dynamics:

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  Tax tightening. Exemptions for battery electric vehicle (BEVs) are being phased out in mature markets; plug in hybrid electric vehicles (PHEVs) particularly those with limited electric range or high emissions, are starting to be taxed more like internal combustion engine vehicles (ICE).
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  Benefit-in-kind (BIK) recalibration. BEV still benefit but rates are rising, with large differences between markets.
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  Purchase incentives. General subsidies reduced or ended, replaced by targeted schemes such as low-income groups, small companies or lower-priced vehicles.
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  European Union (EU) regulation. Clean Corporate Fleet, EU has consulted on a new regulation to increase zero emission vehicle (ZEV) uptake in corporate fleet.
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  The European Union's new Euro 6e-Bis regulation, which came into force on 1 January 2025, introduces stricter test procedures for PHEVs, leading to an increase in their official carbon dioxide emissions, with a significant impact in any country where tax systems are closely aligned with CO₂ emissions.

Key takeaways tax changes 2025

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  Governments are moving from broad purchase subsidies to more targeted long-term fiscal measures.
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  Mature EV countries are scaling back BEV support. One of the reasons is that governments consider uptake strong enough to move to more selective schemes.
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  The same trend will be in 2026, BEV tax treatment tightens further (e.g. Germany, Netherlands, UK).
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  Company cars remain the fastest lever for electrification. Even where some EV advantages shrink, BEVs usually keep a strong BIK edge against ICE vehicles.

Eight countries are included in scope and the focus is on passenger car taxation and not light commercial vehicles (LCVs).

Belgium1 Zero emission vehicles are exempt from road and registration tax in Flanders (private and professional buyers). The road tax and registration tax exemption for zero emission vehicles will be slashed for registrations as of 2026.

France2 CO₂ and weight penalties tighten. BEVs remain exempt for now but from July 2026 face partial weight tax. BIK rules favour EU-built eco-score BEVs. Big increase in BIK (+67%) for ICE, HEV and PHEV. From March 2025, fleets over 100 cars must meet BEV quotas or face annual penalties. Purchase subsidies are replaced by CEE (French energy saving certificate) support.

Germany3 Registration tax, currently BEVs which are first registered by 31 December 2025 are exempt from the vehicle tax for up to 10 years (but no later than 31 December 2030). However, the exemption is planned to be extended. For BEVs that are first registered by 31 December 2030 will qualify for the 10-year exemption lasting but no longer than 31 December 2035. The threshold (list price) for BEVs to qualify for the favourable BIK with “0.25% rule” has been increased from €70k to €100k for EVs purchased after 30 June 2025. PHEVs may qualify for reduced benefit in kind treatment if they meet certain electric range or CO₂ emissions criteria. For BEVs acquired between June 30th, 2025 and 31 December 2027 there is a new depreciation schedule with 75% in the first year.

Purchase subsidy will come into effect in 2026 for new and used BEVs.

Italy4 New BIK scheme applies from January that is based on powertrain and not CO₂ emissions. For BEVs it’s 10%, PHEV 20% and other powertrains 50%. Subsidies launched in September 2025, focused on low-income buyers and micro-firms.

Netherlands5 From 2025, BEVs lose full road tax exemption, now 75% discounted (30% from 2026). PHEVs with CO₂ emissions below 50 g/km have had their discount reduced from 50% to 25% in 2025 and in 2026 there will no longer be a discount for PHEVs. Registration tax exemption also removed.

BEV BIK is 17% up to €30k and then 22% for above €30k. From 2026 BEVs will be taxed the same as ICE for BIK.

Portugal6 Corporate Autonomous Taxation continues to exempt BEVs up to €62.5k and allow for tax discounts for PHEVs up to €50k. ICE passenger vehicles remain penalised.

Spain7 MOVES III extended through 2025 with €400m for the acquisition of BEVs, PHEVs and charging infrastructure. Remains the BIK deduction (30% for PHEV and BEV). Additionally, the “sustainable mobility law” has been approved (8 October 2025) affecting vehicle taxation and incentives (law text not provided yet).

United Kingdom8 From April 2025, BEVs pay Vehicle Excise Duty (VED) (£10 first year, then £195 annually) plus Expensive Car Supplement (ECS) for vehicles with a list price above £40k. 2025-2026 tax year, BIK for BEVs rises to 3% of the P11D value, with further increases announced to 2030, reaching 9% in 2029-2030. PHEVs will be taxed on emissions and range until 2027-2028 and will then be taxed at 18% in 2028-2029 and 19% in 2029-2030. ICE vehicles will be taxed at a higher percentage and from April 2028 the tax will be increased by 1 percentage point each year.

Starting form 1 January 2025, the UK (in line with EU regulations) began applying the stricter Euro 6e-bis emissions standard to newly launched PHEV models. Existing PHEV models must comply by the end of 2025, though vehicles already on the road are exempt. Initial retesting showed that over 55% of PHEV snow exceed the 50g/km CO₂ limit, with many emitting double their previous reported levels. As a results. several models now fall into higher company can tax (BIK) bands, causing some drivers’ tax payments to almost double.

London EV congestion-charge exemption ends December 2025. A new Electric Car Grant launched in July 2025 and valid until 2028-2029 for EVs under £37k.

Zero Emission Vehicles & EV Charge points - 100% First Year Allowances. From 31 March 2026 - End of 100% first year allowances for capital expenditure of zero emission cars and on EV charge points. As of the Autumn budget 2024, the UK government extended the 100% first-year capital allowance (FYA) for qualifying zero-emission cars and EV charging equipment to 31 March 2026. To benefit from FYA the vehicle must be new, unused and acquired outright. This relief allows businesses to fully deduct the cost of new, unused electric cars and charging infrastructure in the year of purchase.

EU has consulted on a new regulation to increase ZEV uptake in corporate fleet, considering policy options ranging from:

• 1.
  1.
  member states ZEV targets;
• 2.
  2.
  targets on specific corporate entities; or
• 3.
  3.
  rules on financial incentives for corporate vehicles.

2025 signals a new phase for European corporate mobility. Incentives are shrinking and rules hardening. Electrification is no longer subsidy-driven but a regulatory requirement.

For fleet managers, this means anticipating tighter taxes, using short windows of advantage, and adapting policies to both employee needs and sustainability goals.

Glossary:

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  BEV – Battery electric vehicle
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  PHEV – Plug-in hybrid electric vehicle
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  HEV – Hybrid electric vehicle
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  ICE – Internal combustion engine
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  TCO – Total cost of ownership
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  Registration tax – one-off at registration
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  Road tax – recurring annual fee
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  BIK – tax on private use of company cars
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  VED (UK) – road tax
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  ECS – Expensive Car Supplement (>£40k list price)
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  Malus (FR) – penalty on CO₂ or vehicle weight
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  Mature EV countries are countries where electric vehicles are the norm e.g. Norway, Netherlands
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  Fleet quotas / ZEV mandate – minimum share of low- or zero-emission vehicles
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  CEE (FR) – Energy Savings Certificates
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  AFIR (EU) – charging infrastructure regulation

Sources:

• 1.
  1.
  https://www.vrt.be/vrtnws/nl/2025/10/09/vanaf-1-januari-verkeersbelasting-op-nieuwe-elektrische-auto-s/
• 2.
  2.
  Accueil | economie.gouv.fr
• 3.
  3.
  https://www.ihkmuenchen.de/ratgeber/steuern/investitionsprogramm/
• 4.
  4.
  https://www.aci.it/, Gazzetta Ufficiale
• 5.
  5.
  https://business.gov.nl/
• 6.
  6.
  https://www.ey.com/en_pt
• 7.
  7.
  https://www.eafo.eu, https://www.transportes.gob.es/el-ministerio/sala-de-prensa/noticias/mie-08102025-2100
• 8.
  8.
  https://www.gov.uk/vehicle-excise-duty https://www.gov.uk/guidance/vehicle-tax-for-electric-and-low-emissions-vehicles

Disclaimer: Some exemptions might apply in specific business/operational context. Regulation and subsidy might be subject of modification from government with no prior notice. This report does not give any representation or warranty as to the legal, regulatory, tax or accounting implications of the matters referred to in this synthesis nor for the accuracy of the information provided herein. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.