From April 2015, two new CCT bands will be introduced at 0-50 grams/kilometre of carbon dioxide (g/km CO2) and 51-75 g/km CO

The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 5% in 2015-16, and 7% in 2016-17. The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 9% in 2015-16 and 11% in 2016-17.

In 2017-18 there will be a 3 percentage point differential between the 0-50 and 51-75 g/km CO2 bands, and between the 51-75 and 76-94 g/km CO2 band.

In 2018-19 and 2019-20 there will be a 2 percentage point differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km CO2 bands.

In future years company car tax rates will be announced three years in advance. The Government will review these incentives for ULEVs in light of market developments at Budget 2016, to inform decisions on CCT from 2020-21 onwards.

Roddy Graham, commercial director of Leasedrive and chairman of the ICFM, said: ‘The U-turn on tax incentives for ultra-low vehicle emissions is to be welcomed although a zero tax would have encouraged more to go down the EV road.

Chris Chandler, principal consultant at Lex Autolease, added: ‘This is a positive development and should help to stimulate the fledgling market for ultra-low emissions vehicles. 

‘Aligning these vehicles to low taxation motoring should help persuade more fleets to use them as part of their everyday operations.’

And David Brennan, managing director of LeasePlan UK, welcomed the move, saying: 'The Chancellor’s decision to apply tax incentives for manufacturing ultra low emitting vehicles will deliver greater choice for business drivers. This decision signifies a return to the sensible policy of incentivising environmentally-friendly vehicles.'

He added: 'Zero-carbon vehicles should still be the industry’s aim, but this will require a long-term commitment in changing infrastructure.'