Company car drivers have been hit in the latest Budget.

Hidden in the full report, which was published shortly after Alistair Darling delivered his 2009 Budget, are details of reforms to the banding of company car tax.

The changes will cost company car drivers and their employees an extra £85 million a year when they come into force in 2011.

The move has been described as a 'stealth tax' on company drivers.

The chancellor said the changes are designed to encourage company car drivers into lower polluting cars.

However, company car tax expert Alastair Kendrick said: "This is a stealth tax that will increase revenue, but has been justified under the green banner." 

The changes mean that from rom 6 April 2011:

  • the basic threshold for the 15% band of company car tax will be reduced by 5g/km of CO2, so that this band will apply to cars emitting between 121 and 129g/km.
  • Company car drivers in cars that produce more than 129g/km will see their tax bill increase by 1% for every 5g per km increase in CO2 emissions, to a maximum of 35%.
  • Discounts currently available for early uptake Euro 4-standard diesel cars, higher-emitting hybrid cars and alternative fuel company cars will be abolished.
  • Hybrid cars emitting 120g/km or less will continue to fall within the 10% band and electric cars will continue to be subject to the 9% band, the lowest for any type of company car.