New green tax bands for company cars

From 2020, drivers could be seeing a range of new company car tax bands introduced for the cleanest cars on the roads.

In a move that is likely to make environmentally friendly cars an even more popular choice with drivers and employers, tax bands could be introduced based on a car's Co2 rating and how many miles it can be driven purely using electricity.

Electric and hybrid cars are proving increasingly popular and the trend is likely to continue. Many dealerships will want to respond to this trend by changing their stock to hold more green models. If you are a dealership owner looking to modify your offering to reflect consumer trends, be sure to update your motor trade insurance or dealers combined insurance to make sure that your cover reflects your new stock.

The decision to introduce new tax categories reflects HM Revenue & Customs' aim to further incentivise the use of ultra-low emissions vehicles. It realises it can do this effectively through providing tax incentives via the company car scheme. It is now proposing that a new tax band with an emissions threshold of just 50g/km of carbon. HMRC said that new cars such as the Nissan Leaf and the Tesla Model S, are “starting to place pressure on the current banding structure".

The Vehicle Certification Agency holds a database containing the zero-emissions capabilities of all vehicles on the roads, which could be used as a basis to adjust the current tax bands.

The move has been welcomed generally, but some leasing organisations have stated that they hope the new system does not over-complicate things for businesses offering company cars.