Expensive EV car supplement another U Turn?
Discussion
The Government is planning to scrap the so-called 'Tesla Tax' on new electric vehicles (EVs) after warnings that it’s putting buyers off and slowing down EV adoption.
A leaked letter from Roads Minister Lilian Greenwood, seen by some media, confirms that changes are being considered for the next Budget. The current rule adds an extra tax on any new car that costs more than £40,000 – including EVs – from April 2025. But the Government now says this policy unfairly affects buyers of zero-emission cars and could be changed or removed.
The extra charge, known officially as the Expensive Car Supplement (ECS), was originally introduced in 2017 for petrol and diesel cars. It adds £425 a year on top of standard car tax, which adds up to more than £3,000 over five years.
Applying the ECS to EVs was part of a broader change announced in a previous Budget, but it’s already faced heavy criticism. Car makers say the rule discourages people from buying electric cars, especially as many cost more than £40,000. Auto Express recently estimated that 7 in 10 new EVs sold in 2025 will be hit by the charge.
Some manufacturers have already dropped their EV prices to just under the £40,000 mark to help avoid the tax – even though it means losing money on each car. Brands like Vauxhall and Abarth have already done this to attract more private buyers.
Greenwood’s letter says the Government will now “consider raising the threshold for zero-emission cars” in future to make them more affordable.
Industry leaders say this move is a good first step but doesn’t go far enough. They argue the UK’s current EV sales targets are unrealistic and the penalties for missing them are too harsh.
Robert Forrester, CEO of car dealership group Vertu, said: “It’s a start, but only part of the solution.” He said high costs, lack of incentives, and poor public charging options are still major barriers.
A leaked letter from Roads Minister Lilian Greenwood, seen by some media, confirms that changes are being considered for the next Budget. The current rule adds an extra tax on any new car that costs more than £40,000 – including EVs – from April 2025. But the Government now says this policy unfairly affects buyers of zero-emission cars and could be changed or removed.
The extra charge, known officially as the Expensive Car Supplement (ECS), was originally introduced in 2017 for petrol and diesel cars. It adds £425 a year on top of standard car tax, which adds up to more than £3,000 over five years.
Applying the ECS to EVs was part of a broader change announced in a previous Budget, but it’s already faced heavy criticism. Car makers say the rule discourages people from buying electric cars, especially as many cost more than £40,000. Auto Express recently estimated that 7 in 10 new EVs sold in 2025 will be hit by the charge.
Some manufacturers have already dropped their EV prices to just under the £40,000 mark to help avoid the tax – even though it means losing money on each car. Brands like Vauxhall and Abarth have already done this to attract more private buyers.
Greenwood’s letter says the Government will now “consider raising the threshold for zero-emission cars” in future to make them more affordable.
Industry leaders say this move is a good first step but doesn’t go far enough. They argue the UK’s current EV sales targets are unrealistic and the penalties for missing them are too harsh.
Robert Forrester, CEO of car dealership group Vertu, said: “It’s a start, but only part of the solution.” He said high costs, lack of incentives, and poor public charging options are still major barriers.
While I get the sentiment here and that £40k is no longer (if it was ever!) a delineator for a luxury car, I have to wonder who exactly is being put off from getting an EV because it costs an extra £350 per year.
If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
JurassicGTS said:
Some manufacturers have already dropped their EV prices to just under the £40,000 mark to help avoid the tax – even though it means losing money on each car. Brands like Vauxhall and Abarth have already done this to attract more private buyers.
Hyundai very quiety (haven't seen in mentioned anywhere) reduced list on Kona EV in April - they knocked about £4K off. Daft thing is adding met paint puts it £5 over the £40K limit. Further daft thing is daughter bought one last December and got £10K discount.andrewpandrew said:
I assume that there is still the caveat that delivery and registration fees don’t count towards the £40k threshold? If this was the case, couldn’t manufacturers just have a sub £40k list prices, but overinflated OTR prices?
Delivery counts but not registration fee and cost of VED.Rough101 said:
Familymad said:
I decided to go for a pre reg. VW had registered 100 ID7’s before end of April to avoid this. Was going to get a new Buzz or EV9.
How does a pre-reg avoid this? Are they just hit with the £195 going forward?andrewpandrew said:
I assume that there is still the caveat that delivery and registration fees don’t count towards the £40k threshold? If this was the case, couldn’t manufacturers just have a sub £40k list prices, but overinflated OTR prices?
Because people love a 'discount'. Same reason they don't just lower list prices instead of offering 0% finance and a deposit contribution of several thousand quid, or just a straight up '£5k off this month'.Government has no interest at all on cracking down on it either, because taxation or BIK levels are based on list price, not what actually gets paid.
JurassicGTS said:
A leaked letter from Roads Minister Lilian Greenwood, seen by some media, confirms that changes are being considered for the next Budget. The current rule adds an extra tax on any new car that costs more than £40,000 – including EVs – from April 2025. But the Government now says this policy unfairly affects buyers of zero-emission cars and could be changed or removed.
I don't think the expensive car supplement has ever been emissions based for ICE vehicles? I think it's always been purely a tax on the value of the car with the "logic" being as simple as if you can afford a car costing more than £40k you can afford to pay more tax. That being the case I don't understand why the policy is unfair to buyers of zero emission cars - if they can afford an EV costing over £40k surely they should be liable for the supplement in the same way as buyers of ICE cars? It's list price that determines liability for this particular tax, not emissions.Whether the supplement was ever appropriate in the first place is of course another matter. And even if you think it was it's probably questionable whether the starting point should still be £40k after 8 years of inflation - but just like freezing personal tax bands it's no doubt gradually generating more tax as the list prices of more and more cars creep above the £40k threshold....
sahajesh said:
While I get the sentiment here and that £40k is no longer (if it was ever!) a delineator for a luxury car, I have to wonder who exactly is being put off from getting an EV because it costs an extra £350 per year.
If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
I'd agree, but then the push for £30 VED and the like, did seem to change a lot of perceptions. If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
recordman said:
Why don't the motor manufacturers stick a finger up to the government and either abolish list prices or price every car at £10k with 'offers over' just like the housing market in Scotland?
We are about 8 years into the scheme and none have so far, given inflation in car prices it’s hard to keep cars under £40k now unless buying an econobox, at the start you just had to be careful with extras sahajesh said:
While I get the sentiment here and that £40k is no longer (if it was ever!) a delineator for a luxury car, I have to wonder who exactly is being put off from getting an EV because it costs an extra £350 per year.
If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
Got my sal sac hat on here but a £30-£40 per month increase can easily be the difference between being able to order and not for a lower rate tax payer. Appreciate there are a number of cars on the market sub £40k however these aren't necessarily the most desirable.If the margin between an EV being affordable or not affordable is £350 per year, then a potential owner should reconsider their car choice. An EV owner will save more than £350 per year, so the saving just ends up being a bit less.
Mammasaid said:
bbr92 said:
Could someone clarify something for me? If I was to buy a 2022 EV today that was originally over £40k when new would the luxury car tax apply or would it simply be £195 per year?
No LCT, yes £195 VEDTaxed mine in March (£0) to push the VED out another year!
Sheepshanks said:
JurassicGTS said:
Some manufacturers have already dropped their EV prices to just under the £40,000 mark to help avoid the tax even though it means losing money on each car. Brands like Vauxhall and Abarth have already done this to attract more private buyers.
Hyundai very quiety (haven't seen in mentioned anywhere) reduced list on Kona EV in April - they knocked about £4K off. Daft thing is adding met paint puts it £5 over the £40K limit. Further daft thing is daughter bought one last December and got £10K discount.The change was partly driven by my desire to avoid paying the “luxury car tax” when we changed.
Over 30% off the list price & a fair trade-in: always helps
JNW1 said:
I don't think the expensive car supplement has ever been emissions based for ICE vehicles? I think it's always been purely a tax on the value of the car with the "logic" being as simple as if you can afford a car costing more than £40k you can afford to pay more tax. That being the case I don't understand why the policy is unfair to buyers of zero emission cars - if they can afford an EV costing over £40k surely they should be liable for the supplement in the same way as buyers of ICE cars? It's list price that determines liability for this particular tax, not emissions.
Whether the supplement was ever appropriate in the first place is of course another matter. And even if you think it was it's probably questionable whether the starting point should still be £40k after 8 years of inflation - but just like freezing personal tax bands it's no doubt gradually generating more tax as the list prices of more and more cars creep above the £40k threshold....
I fully agree with the above, but the government is hell bent on everyone having an EV so reducing this expensive car tax on EV's will hopefully stimulate the market. But as has also been said without infrastructure it is still a mute point.Whether the supplement was ever appropriate in the first place is of course another matter. And even if you think it was it's probably questionable whether the starting point should still be £40k after 8 years of inflation - but just like freezing personal tax bands it's no doubt gradually generating more tax as the list prices of more and more cars creep above the £40k threshold....
You only have to look at the wider problem for ICE vehicles over 40K, lots of new ICE cars not really moving due to this additional taxation, 2nd hand values staying higher as they're easier to shift.
I'm certainly not looking at a brand new car in 2025, but I'd happily have a pre-reg Q1/25 car and dodge the tax.
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