By What’s Changing in UK Car Tax?
The biggest change is the extension of the “Expensive Car Supplement” to electric vehicles. Previously, this extra £425 annual fee applied only to petrol and diesel cars with a list price over £40,000. From April 2025, the same rule applies to electric cars costing more than £40,000 when new.
This supplement is added to the standard car tax rates. For most vehicles, this means:
- In the first year after registration, a lower rate of tax applies.
- From year two to year six, drivers pay the standard rate plus the £425 supplement.
For example, an electric car with a list price over £40,000 will now cost around £620 per year in tax after the first year—far more than many owners expected.
Why Did the Government Make This Change?
The government says the goal is to create fairness between traditional petrol/diesel cars and electric vehicles. Since EVs don’t pay fuel duty, the added tax helps balance lost revenue and encourages more responsible road use.
However, critics argue that the £40,000 threshold hasn’t changed since 2017, despite rising car prices. This means many EV buyers face higher costs at a time when electric cars are meant to be a cleaner, more affordable alternative.
Who Will Be Affected?
This change impacts around 70% of new electric cars on the market. Models like the Tesla Model S, Audi Q8 e-tron, and certain trims of the Hyundai Ioniq 6 now fall into the higher tax bracket.
Drivers of these cars will face an extra £425 annually from year two onward for the first five years of ownership, increasing the total tax bill significantly.
What Does This Mean Financially?
Over six years, the extra charge can add up to more than £3,000 in additional tax payments. This cost might affect buyers’ decisions, especially those leasing vehicles or running business fleets.
Higher tax payments could also influence insurance costs and the total cost of ownership, potentially making some EVs less affordable than expected.
What Can Drivers Do?
- Check the list price before purchasing a new vehicle to understand the tax implications.
- Compare total ownership costs, including tax, insurance, and maintenance, to make an informed decision.
- Explore government incentives and grants available for electric vehicles and home charging.
- Consider alternative models below the £40,000 threshold to avoid the expensive car supplement.
Looking Ahead
The £40,000 limit has been criticized for being outdated, and there are calls for the government to review and adjust it to better reflect today’s car market. Drivers and industry groups will be watching closely to see if any changes come before the tax is due.
Staying informed about these developments will help you navigate the evolving landscape of vehicle taxation in the UK.
If you own or plan to buy an electric vehicle, now is a good time to review your options carefully and consider how these tax changes affect your budget.