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If you’re buying a car, especially a newer or higher-spec model, you may have heard mention of the luxury car tax and wondered whether it applies to you. Many drivers aren’t aware of this charge until it appears on their paperwork, and it can come as an unwelcome surprise.
Here’s a clear, simple guide to what the luxury car tax is, who needs to pay it, and how it could affect you. Whether you’re buying new, second hand, or considering an electric vehicle.
What is the luxury car tax?
The “luxury car tax” isn’t a separate tax as such. It’s the commonly used name for the Vehicle Excise Duty (VED) expensive car supplement.
In simple terms, it’s an extra annual charge added to standard car tax if your vehicle had a list price of more than £40,000 when it was new.
This applies regardless of whether you bought the car outright, on finance, or second hand.
When was the luxury car tax introduced?
The expensive car supplement was introduced in April 2017 as part of changes to Vehicle Excise Duty rules in the UK.
Since then, many cars that don’t feel especially “luxurious”, such as family SUVs or well-specified estates, can still fall into this category due to higher list prices.
How much is the luxury car tax?
If your car qualifies, you’ll usually pay:
- An additional £450 per year (rate correct for 2024/25)
- For five years
- Starting from the second year the car is registered
This is on top of the standard VED rate.
So over five years, the supplement can add up to quite an additional amount, which is why it’s worth knowing about in advance.
Does it apply to second-hand cars?
Yes and this often catches people out.
The luxury car tax is based on the original list price, not the amount you paid. This means that even if you buy a used car for well under the £40,000, you may have to pay the supplement if the vehicle originally had a list price of £40,000 or more and is still within its five-year supplement period.
It’s always worth checking a car’s tax status before buying
What about electric vehicles (EVs)?
Electric vehicles have historically been exempt from both standard VED and the luxury car tax, but this changed from April 2025.
From 1 April 2025:
- EVs started to pay Vehicle Excise Duty at levels dependent on the original registration date
- Electric cars with a list price over £40,000 were also subject to the luxury car tax
This is particularly relevant, as many EVs exceed the £40,000 threshold due to battery and technology costs.
In the November 2025 budget, the Government changed the list price (on the road car price) threshold at which the expensive car supplement applied from £40,000 to £50,000, but for electric cars only. This enables a much bigger proportion of new electric cars to be exempt, going forward.
These changes are effective from April 2026, but the change is retrospective for vehicles, meaning EV drivers who bought an electric car with a list price between £40,000 and £50,000 after 1 April 2025, will no longer have to pay the supplement.
Protecting what matters on the road
Whether you’re driving a brand-new car, a second-hand vehicle, or an electric model, having the right insurance in place is just as important as understanding the tax.
Police Mutual offers Car Insurance designed with the needs of police officers, staff, and their families in mind. To find out more and see if it’s right for you, take a look at our car insurance options today.
You can either call us on 0151 242 7640 or go online at policemutual.co.uk/car
Police Mutual Car Insurance is provided by ERS.
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