The average carbon dioxide emissions of new company cars have dropped to an all-time low of 138.1g per km, according to research by ALD Automotive.
That figure compares with an average figure of 142.6g per km in 2010 and 166.8g per km in 2003.
The research also found that environmentally friendly cars are being adopted by employers in record numbers and employees are travelling fewer miles as part of a continuing focus on the reduction of vehicle operating costs.
From April 2012, the emissions threshold for fleets will be reduced, meaning that the new 10% low-rate band for company cars will start at 99g per km as opposed to the current 120g per km. Company car tax will increase by 1% for each 5g per km rise in CO2 above the 99g.
This means that, for the tax bands to remain static, some cars emitting 120g of CO2 per km or less that currently qualify for the ultra-low 10% band, could see a significant increase in their tax liability.
Keith Allen, UK managing director at ALD Automotive, said: “It is evident from the analysis that UK businesses are really taking notice when it comes to reducing their CO2 emissions and mileage.
“There is such a big correlation now between taxation and emissions, that it is vital that employers and staff stay one step ahead of changes in legislation.
“With changes to benefit-in-kind rates coming into effect in 2012 and the lowering of the base threshold of emissions from 120g per km to 99g per km, employers and staff should continue to keep one eye on their choice of car to ensure that they do not suffer financially.”
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