Hundreds of thousands of British motorists are facing an annual £425 charge after being caught by a tax rule originally aimed at luxury vehicles, new research reveals.
Sharp Rise in Drivers Paying the Supplement
Data obtained via a Freedom of Information request to the DVLA shows a dramatic 42 per cent increase over two years in the number of people paying the Expensive Car Supplement (ECS). In the 2022/23 financial year, just under 300,000 petrol, diesel, electric, and hybrid vehicles were subject to the charge. That figure has now ballooned to a staggering 426,758 cars.
The levy, often dubbed the "luxury car tax," was introduced by the government in 2017. It requires drivers to pay an extra £425 per year for five years, starting from the second year of registration, if their vehicle had a list price exceeding £40,000 when new.
Modern Family Cars Now Exceeding the Threshold
Motoring experts warn that the £40,000 threshold is now ensnaring many ordinary family vehicles, not just premium models. Ben Welham, a motoring expert at Marshall Motor Group, commented on the findings.
"The FOI data shows just how many modern cars have ended up above the £40,000 threshold," said Mr Welham. "These are vehicles that many drivers wouldn't consider 'expensive' by today's standards."
He highlighted the particular impact on popular hybrid models. "Hybrids are increasingly common and have become the go-to choice for families who want fuel efficiency without going fully electric. But a hybrid SUV can easily tip over £40,000 when it's equipped with the safety and tech features many buyers expect today."
Mr Welham emphasised that many affected cars are practical family vehicles, not luxury purchases. The situation is similar for electric cars, where battery costs mean a mid-spec electric family SUV often has a higher starting price than its petrol equivalent.
Policy Context and Electric Vehicle Grants
The rise in ECS payments occurs alongside the expansion of government incentives for electric vehicles. More than 40 models are now eligible for Labour's Electric Car Grant, which can provide savings of up to £3,750 on EVs costing £37,000 or less.
This creates a contrasting financial landscape for drivers: a subsidy for cheaper electric cars, but a substantial annual surcharge for any new vehicle—electric, hybrid, or conventional—that crosses the £40,000 mark. With inflation and the increasing cost of technology, this threshold is capturing a growing number of motorists each year.
