Background
The UK Government introduced the Expensive Car Supplement in April 2017 as an additional element of Vehicle Excise Duty (VED). It applies to cars with a list price above £40,000 when new. Historically, fully electric cars were exempt from this charge, while petrol, diesel and hybrid vehicles above the threshold were required to pay a flat £425 supplement.

From 1 April 2025, this exemption ended, bringing hybrid and electric vehicles in line with petrol and diesel cars. In recognition of the shift towards electrification, the Government has since increased the threshold for electric vehicles to £50,000. This higher limit applies from April 2026 and is being applied retrospectively to EVs registered from 1 April 2025 onwards.

Costs
The Expensive Car Supplement is applied annually from years two to six of a vehicle’s life. It is calculated based on the car’s P11D price when new. This consists of the List price (inc. VAT) + Delivery (inc. VAT) + Optional equipment. Discounts do not reduce the list price for tax purposes.

To avoid the supplement, customers may choose to remove or adjust certain optional features to ensure the P11D price remains below the relevant threshold. It is therefore important to review the list price carefully, especially if a discount is applied.

The current supplement is £425 per year, payable in addition to the standard VED rate of £195 from the second year onwards. For cars above the £40,000 threshold (or £50,000 for qualifying EVs), this results in total VED of £620 per year for five years—an additional £3,100 across the six‑year period.

Electric Vehicles
From April 1st 2026, the threshold for EVs is £50,000. As this change is being applied retrospectively, electric cars registered from 1 April 2025 with a P11D price between £40,000 and £50,000 will no longer be subject to the supplement.

Initially, from April 2025, all new electric vehicles priced above £40,000 were due to be charged. The Government’s later announcement—raising the EV threshold to £50,000—means that more electric cars will now be exempt.

If you need any assistance with understanding the threshold and whether your car is or isn't exempt, please contact us and we will be happy to help.