In a significant move designed to bolster the adoption of electric vehicles (EVs) in the UK, the government has announced a higher luxury car tax threshold specifically for EV buyers. Effective from 1 April 2026, the Expensive Car Supplement will rise from £40,000 to £50,000. This change promises to provide financial relief to many potential EV buyers, making it an opportune moment to explore what this means for consumers considering an electric vehicle.
According to guidance published by RAC, cars first registered from 1 April 2025 onward will be eligible for this new threshold. Currently, vehicles with a list price exceeding £40,000 incur the Expensive Car Supplement, commonly referred to as luxury car tax, which amounts to an extra £425 annually on standard Vehicle Excise Duty (VED) payments. With the increased threshold, many popular electric models will fall below this limit, offering substantial savings for drivers.
Implications for Electric Car Buyers
For consumers, raising the threshold provides a timely financial boost, especially as electric models often come with a higher price tag than their petrol and diesel counterparts. Drivers with electric vehicles that come in under the new £50,000 benchmark will avoid the annual surcharge of £425. This change not only benefits individual buyers but also makes electric cars more appealing for company car drivers looking to save on tax liabilities.
It’s essential to note, however, that this new threshold doesn’t eliminate road tax entirely for electric vehicles. EV drivers will still be responsible for the standard VED rate, which will now become a flat fee from April 2026.
Upcoming Tax Changes for EV Owners
While the news about the luxury tax threshold is positive, various changes are on the horizon that may impact electric vehicle owners. Starting in April 2026, electric cars will no longer qualify for free road tax. Instead, they will pay a standard flat VED rate, anticipated to increase slightly to £200 per year, up from £195.
Looking even further ahead, the government plans to introduce a new pay-per-mile electric Vehicle Excise Duty (eVED) system beginning in April 2028. Under this proposed plan:
- Fully electric vehicles would be charged 3p per mile
- Plug-in hybrid vehicles would incur a charge of 1.5p per mile
For the average electric car driver covering approximately 8,000 miles annually, this could lead to an additional £240 per year in taxes on top of the standard VED. The specifics of how mileage will be tracked remain unclear, but the government has indicated that privacy will be preserved, with no tracking of journey locations. Instead, checks may occur at vehicle registration anniversaries, involving MOT test centers.
Insights from DM News
Raising the threshold for the luxury car tax to £50,000 represents a practical approach that acknowledges the reality of electric vehicle pricing in the UK. Many electric cars easily surpass the previous £40,000 limit once additional features are considered, thus placing an extra financial burden on what would otherwise be classified as “ordinary” vehicles.
This adjustment reflects a delicate balance: while offering immediate relief to new EV buyers, it signals a shift away from earlier tax exemptions for electric vehicles. With the return to flat-rate VED in 2026, complemented by the forthcoming mileage-based charges in 2028, EV drivers are gradually reintegrating into the broader tax framework.
For consumers—especially those covering significant distances—the evolving cost landscape for electric vehicles will require careful financial planning moving forward. Understanding these developments will be crucial for managing the long-term implications of ownership in a changing regulatory climate.
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