From April 2011, company car tax is to be reformed to encourage drivers to choose cleaner and more efficient cars. The threshold for the 15 per cent rate of tax will be reduced by 5g/km of CO2 – so it will apply to cleaner cars emitting between 121g/km and 129g/km of CO2.

The changes were announced in the emergency Budget announced by the Chancellor George Osborne on June 22 2010. It comes after the BVRLA called for the government to scrap the 3 per cent surcharge on diesel cars for good.

The percentage of the cars price subject to tax will continue to increase by one percentage point with every 5g/km of CO2 up to 35 per cent. The cap on car list prices used to work out the taxable benefit from company cars will also be abolished, as will discounts for early uptake Euro 4-standard diesel cars, higher-emitting hybrid cars and alternative fuel company cars.
The June 2010 emergency Budget from the new Con/Lib Dem government confirmed many of the previously announced changes to company car tax to encouraging the purchase and lease of the lowest emitting cars.

The cap on car list prices of £80,000 used to calculate the benefit will also be removed in April 2011.
From April 2012 the 10 per cent band for cars emitting 120g CO2 per km or less will be removed and the system of bands will be extended so that they increase by one percentage point with each 5g CO2 per km increase in emissions from 10 per cent. The 10 per cent band will apply to cars that emit 99g CO2 per km or less.