Motorists across the UK are facing significant new financial pressures following the Labour Party's Autumn Budget, which introduces a higher tax threshold for luxury cars and a new charge for electric vehicle drivers.
Expensive Car Supplement Threshold Hike
The government has announced that the threshold for the Expensive Car Supplement (ECS) will increase from £40,000 to £50,000, effective April 2026. This change is projected to cost the treasury £500 million in the 2030-2031 financial year.
For drivers purchasing a car above the threshold in the 2025-2026 tax year, the total supplement paid over five years will be £2,370. This equates to an average annual cost of £474, a rise from the current rate of £425 for vehicles costing more than £40,000.
New Pay-Per-Mile Charge for Electric Vehicles
In a move that has sparked controversy, the Chancellor also confirmed a new pay-per-mile charge for electric and plug-in hybrid vehicles, set to begin in April 2028.
According to the Office for Budget Responsibility's analysis, this will be a 3p per mile tax, set at around half the current fuel duty rate paid by petrol car drivers. The charge is expected to raise £1.4 billion and will increase annually with inflation.
John Murray, Head of Electric Vehicles at LCP Delta, criticised the policy, stating: "The Government’s decision to introduce a £0.03-per-mile tax for EV drivers poses a serious risk to the industry. It makes the switch to electric vehicles less attractive and risks hardening public scepticism at a critical moment for mass adoption."
Crackdown on Luxury Motability Vehicles
Chancellor Rachel Reeves also announced a crackdown on the Motability scheme, targeting the provision of luxury vehicles funded by taxpayer subsidies.
During her Autumn Statement, she declared: "The Motability scheme was set up to protect the most vulnerable, not to subsidise the lease on a Mercedes Benz. I am making reforms that will reduce generous taxpayer subsidies, and Motability have confirmed that they will remove luxury vehicles from the scheme."
The reforms aim to return the scheme to its original purpose of offering cost-effective leases to disabled people, following scrutiny over both the broad eligibility criteria and the types of high-end vehicles available.
Industry experts warn that the new EV tax could slow the adoption of electric vehicles in the UK, creating a contradictory policy landscape that offers incentives with one hand while undermining them with the other.
