Employees driving electric cars will enjoy a tax break on their company car tax, the chancellor revealed in his Pre-Budget Report.

Alistair Darling said: "To help boost the number of electric cars on our streets, I have decided to exempt them from company car tax for five years."

He also confirmed from 6 April 2012 the current graduated table of company car tax bands will be extended down to a new 10% band, and all CO2 emissions thresholds moved down by 5g/km. This will mean that the 10% band will apply to company cars with CO2 emissions up to 99g/km. Qualifying Low Emissions Cars (QUALECs) will therefore no longer exist as a separate category.

The appropriate percentage for electric cars for the purposes of company car tax will be reduced from 9% to 0% for five years from April 2010. This will reduce the employee car benefit charge to nil and remove the Class1A National Insurance Contribution charge on employers.