Chancellor Rachel Reeves has confirmed new car tax rules that will save owners of certain electric vehicles (EVs) hundreds of pounds. The so-called £425 'luxury' car tax, applied on top of the standard rate for more expensive cars, will no longer apply to EVs with a list price between £40,000 and £50,000 when new.
Tax Threshold Change
The threshold for the additional tax on EVs has been raised from £40,000 to £50,000. This means that electric cars sold for between £40,000 and £50,000 will now be exempt from the extra charge. The change, confirmed by the Treasury, delivers significant savings for owners of popular models.
Affected Models
Popular EVs now exempt from the luxury tax include the Tesla Model 3, Tesla Model Y/Y Premium, Audi Q4 e-tron, BMW iX1/iX2, Polestar 2, and Hyundai Ioniq 5/6. However, motoring experts warn that not all variants of these models are exempt, as the tax is based on the individual car's list price at purchase.
Savings Over Five Years
Alex Lee, motoring expert at Dick Lovett, commented: 'For anyone looking at a new EV, this tax change offers a welcome savings opportunity. For those looking at electric cars between £40,000 and £50,000, drivers can now expect to save £2,125 over five years.'
Lee added: 'This also means that drivers will have more choice when it comes to mid-range EVs, and can add higher spec trims to these models without worrying about extra taxes being applied. For example, the MINI Countryman SE ALL4 models would already have been exempt, but buyers can now benefit by adding high spec configurations such as their Level 1 Pack (from £42,705) without triggering the additional tax.'
Check Individual Models
Lee stressed the importance of checking specific models: 'With the changes in this tax, it's important for drivers to look into the specific car they are wanting to get to avoid any confusion, as not all models will now be exempt. The tax is based on the list price of your vehicle at purchase, so be sure you're not opting for trims that push you over the threshold without knowing. It's always best to head into a dealership to chat through your options if you're not sure on pricing.'
