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New company car tax bands based on CO2 have been revealed in today's Budget, including abolishing the 10% band for cars below 120g/km.
From the tax year starting 6 April 2011, the 15% starting point for the benefit-in-kind tax band system will drop 5g/km to sub-130g/km.
All subsequent bands will also drop, meaning the top 35% band starts at 225g/km for petrols and 210g/km for diesels.
From the 2012 tax year bigger changes are made to the BIK system.
Although the details have not been revealed in this Budget the Chancellor's statement reported: "Since April 2008, there has been a 10% band for cars emitting 120g/km or less but by 2012, as new technology develops and the EU targets for carbon dioxide from cars come into force, the Government expects many more vehicles to fall within this category.
"To continue to provide an incentive to purchase the lowest-emitting vehicles on the market, the Government intends to remove this category in 2012 and instead extend the system of company car tax bands so that they increase by one percentage point with every 5g/km increase in emissions, from 10%.
"Details of specific rates and thresholds for 2012 will be announced in future Budgets."
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