The chancellor has introduced tax incentives for company drivers who opt for ultra-low emission cars.

From April, the new incentive means those who opt for an ultra-low emission car will pay just 5% BiK.

However, cars that qualify for the new tax breaks – those that emit between one and 75g/km of CO2 – are still months away from being available.

The plug-in version of the Toyota Prius is likely to be the first and this will not be available until late-2011 at the earliest.

As reported last year, company drivers who get behind the wheel of a zero-emission electric car will pay no BiK for five years from April.

There was some confusion over what cars would qualify for this incentive. Now, with the introduction of this new 5% band, the chancellor has remioved that confusion.

“The Chancellor’s decision to halve company car tax for ultra-low carbon cars is a nice gesture,” said BVRLA chief executive, John Lewis.

“This is definitely an incentive for the future - company car drivers will struggle to find a suitable ultra-low carbon car at the moment.” 

Read the Budget text on these changes to company car tax here.