Chancellor Rachel Reeves' planned changes to the so-called 'luxury' car tax are poised to impact hundreds of thousands of ordinary family vehicles, with new figures revealing a significant surge in the number of cars caught by the charge.
Threshold Rise for EVs as More Cars Are Caught
In response to mounting data, the Treasury has confirmed it will increase the Expensive Car Supplement (ECS) threshold for electric vehicles to £50,000, effective from April 2026. This move is designed to reflect the higher average price of new electric models compared to when the original £40,000 limit was set in 2017.
However, petrol, diesel, and hybrid vehicles will remain subject to the existing £40,000 limit. The decision follows a Freedom of Information request to the DVLA, which showed a dramatic 42% increase in vehicles liable for the supplement. The number rose from 299,553 in the 2022/23 financial year to 426,758 in 2024/25.
Soaring Numbers of 'Everyday' Vehicles Affected
The core issue, according to motoring experts, is that the £40,000 threshold now encompasses many models that are considered standard family transport, not luxury vehicles. Rising production costs and the increased adoption of hybrid and electric technology have pushed more cars over the limit.
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," he said. "These are vehicles that many drivers wouldn’t consider 'expensive' by today’s standards. The threshold rise to £50,000 for EVs is a sensible update and reflects how pricing has evolved since 2017."
Hybrid Surge and Changing Trends
The data reveals particularly stark trends for different fuel types. The number of hybrid vehicles paying the ECS more than doubled in just two years, jumping from 116,568 in 2022/23 to 247,613 in 2024/25.
In contrast, diesel vehicles in the tax bracket fell sharply from 68,488 to 31,091 over a similar period. A significant portion of the electric car market now sits in the £40,000 to £50,000 price range, which will be exempt from the supplement after the 2026 change.
From April 2025, new electric vehicles became liable for standard Vehicle Excise Duty (road tax), including the annual £425 Expensive Car Supplement charge, which applies from the second year of ownership if the list price exceeds the relevant threshold.
The upcoming adjustments highlight the government's challenge in updating tax systems designed for a previous era of motoring, as the shift to electrification and higher manufacturing costs reshapes the automotive landscape for everyday families.
