More than 475,000 drivers are set to save £425 a year thanks to changes in the so-called luxury vehicle tax, or Expensive Car Supplement, announced in the Labour Party Autumn Budget 2025 by Chancellor Rachel Reeves. The supplement, an additional charge on top of standard Vehicle Excise Duty (VED) for vehicles exceeding a certain price threshold, will see its threshold for electric vehicles increase from £40,000 to £50,000 from April 1, 2026.
Which Cars Are Exempt?
Motor group Dick Lovett calculated that at least 475,836 drivers would benefit from this tax change, saving £425 annually. There are 116 EV models across 23 ranges that fall within the £40,000 to £50,000 bracket. Models exempt from the luxury vehicle tax after April 1, 2026 include:
- Audi Q4 e-tron (82,925 registered vehicles in Q2 and Q3 2025)
- BMW iX1 and iX2 (46,017 registered vehicles)
- BYD Seal Design EV and Sealion 7 Comfort EV (7,216 registered vehicles)
- Cupra Tavascan (5,667 registered vehicles)
- Ford Capri (2,284 registered vehicles)
- Hyundai Ioniq 5 and Ioniq 6 (20,161 registered vehicles)
- Lexus RZ (2,209 registered vehicles)
- Mercedes-Benz CLA Electric and EQA (2,000 registered vehicles)
- MG IM6 Long Range (27 registered vehicles)
- Peugeot E-3008 and E-5008 (19,609 registered vehicles)
- Polestar 2 (44,347 registered vehicles)
- Skoda Enyaq (22,534 registered vehicles)
- Tesla Model 3 Premium, Model Y and Model Y Premium (211,125 registered vehicles)
Expert Insights
Alex Lee, motoring expert at Dick Lovett, said: "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." He 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 from this luxury car tax, but buyers can now benefit by adding high spec configurations such as their Level 1 Pack (from £42,705) without triggering the additional tax on their car."
Important Considerations
However, Lee cautioned: "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. While BMW's iX1 and iX2 ranges now fall under the luxury car tax threshold, the iX M60 models will not be exempt from the £425 per year charge." He further advised: "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."
