Thousands of UK motorists are set for a significant change in vehicle taxation rules from next year, with the government announcing an increase to the threshold for the so-called 'luxury car tax' on electric vehicles.
What is Changing with the VED Expensive Car Supplement?
The Labour government has confirmed that the Vehicle Excise Duty (VED) Expensive Car Supplement threshold for zero-emission cars will increase by £10,000. This change will take effect from April 1, 2026.
Currently, buyers of new zero-emission cars, including electric vehicles (EVs), must pay the annual supplement if the car's purchase price exceeds £40,000. From the implementation date, this trigger point will rise to £50,000.
This means drivers who purchase an electric car priced between £40,000 and £50,000 after April 2026 will no longer be liable for the extra charge each time they tax their vehicle.
How the Expensive Car Supplement Works
The Expensive Car Supplement (ECS) is an additional annual charge on top of the standard VED rate. It currently stands at £425 per year and is payable for five years, starting from the second vehicle licence (the first tax payment after the car is one year old).
It is crucial to note that this threshold increase applies only to zero-emission vehicles. The threshold for petrol and diesel cars will not be raised in April 2026 and remains at £40,000.
Broader Context of EV Taxation
This announcement comes after a major shift in how electric vehicles are taxed. Previously, EVs were exempt from the standard £195 annual flat rate VED that applies to most newer cars.
However, that exemption ended on April 1, 2025, bringing electric and hybrid cars into the same VED banding system as petrol and diesel models based on their CO2 emissions.
The government has also confirmed a transitional measure. Most vehicles registered from April 1, 2025, will not pay the supplement, as the changes apply retroactively. Any vehicle taking out a 'second licence' effective before April 1, 2026, will pay only one year of the charge.
Standard VED rates for cars registered after April 2017 continue to vary significantly. They are calculated on the car's fuel type and official CO2 emissions, ranging from £10 for zero-emission models to £5,490 for cars emitting over 255g/km.
This policy adjustment represents a targeted incentive for the adoption of premium electric vehicles, while maintaining fiscal contributions from the most expensive models on Britain's roads.
