Electric Car Luxury Tax Changes: All You Need To Know

There’s been a major update announced in the Government Budget - and if you’re thinking about switching to an electric or hybrid car in the next year or two, this is exactly the time to pay attention.

From April 2026, the “expensive car supplement” threshold will change AND from April 2028, electric vehicles (EVs) and plug-in hybrids will be charged a new pay-per-mile road tax, 

Here’s everything you need to know - and which models you can secure now before these changes affect you.

What Is the Luxury Car Tax?

The luxury car tax - officially called the Expensive Vehicle Supplement - applies if:

• Your car cost more than £40,000 when brand new,
• It’s less than six years old, and
• It was first registered on or after April 2017.

If your car meets those criteria, you pay:

• Standard VED: £195
• Luxury Car Supplement: £425

Total per year: £620

And you pay this for five years, costing £2,125 in total.

What’s Changing for Electric Cars?

For EVs registered from 1 April 2025 onwards, the luxury car tax threshold increases to £50,000, but this only takes effect from 1 April 2026.

That means:

• EVs with a list price between £40,000 and £50,000 → ❌ No luxury car tax, as long as the licence is effective on or after 1 April 2026

• EVs with a list price over £50,000 → ✅ Luxury car tax applies, same as petrol, diesel, and hybrid cars over £40,000

Petrol, diesel, and hybrid cars remain subject to the £40,000 threshold.

EVs at D. M. Keith That Avoid the Luxury Car Tax

These EVs are priced below £50,000, depending on model and specification, and can save customers up to £1,775 over 5 years in luxury car tax alone if the licence is timed correctly:

BYD Seal

Skoda Kodiaq

Skoda Enyaq

Kia Niro EV

Honda e:Ny1

BYD Sealion 7

Including electricity and lower maintenance costs, total savings could reach £2,500–£3,000+ over 5 years.

Based on average mileage and typical UK electricity and maintenance costs; actual savings may vary

So Why Buy Now? Here’s the Customer Advantage

If you're considering an EV, buying before April 2026 gives you three major advantages:

1. You lock in today’s RRP

Prices rise every year. Buying early avoids later price increases - especially important for models close to the £50k line.

2. You avoid being caught in the “April 2025–April 2026” supplement gap

Any EV over £40k registered in this window STILL gets charged the £425 supplement - even after the rule changes.

Buying now gives you full clarity and avoids paying £2,125 extra over five years.

3. Demand will surge closer to April 2026

Many customers will suddenly try to buy before the threshold lifts. Ordering now ensures availability and avoids waiting lists.