Expensive Car Supplement: Who Pays It and the New EV Threshold

The expensive car supplement is an extra amount of Vehicle Excise Duty (road tax) charged on top of the standard rate for any car with a list price above £40,000 when it was first registered. It is payable for five years — the second to sixth annual licence — and since 1 April 2025 it applies to electric cars as well as petrol, diesel and hybrid ones, although the government has moved to raise the threshold for zero-emission cars to £50,000.

The crucial detail that catches people out is that the test is the manufacturer's published list price, not the discounted figure on your invoice. A £43,000 car bought for £38,500 still pays the supplement.

Key points

• The supplement applies to cars first registered on or after 1 April 2017 with a list price over £40,000.
• It is charged for five years, from the second to the sixth annual licence, then drops away.
• List price includes factory options, dealer-fitted extras, delivery charges and VAT — and ignores any discount you negotiated.
• It follows the car, not the owner, so a second-hand buyer inherits whatever years are left to run.
• Electric cars registered from 1 April 2025 are in scope; the threshold for zero-emission cars is being lifted to £50,000.

What the expensive car supplement is

Vehicle Excise Duty for cars registered since April 2017 works in two stages. In the first year you pay a one-off rate based on the car's CO2 emissions, usually wrapped into the on-the-road price by the dealer. From the second year onwards you pay a flat standard rate that is the same for almost every car, regardless of emissions.

The expensive car supplement sits on top of that standard rate. If the car's list price when new was more than £40,000, you pay the standard rate plus the supplement each year for five years. It is an addition to the annual licence, not a separate bill, so you will simply see a higher figure when you tax the car.

It applies to cars only — vans, motorbikes and motorhomes are taxed under different rules. Vehicle Excise Duty is also a UK-wide, reserved tax, so the supplement is identical in Scotland, Wales and Northern Ireland. Unlike income tax, there is no Scottish variation to worry about.

How much it costs

Both the standard rate and the supplement are uprated each April, normally in line with RPI. In 2025/26 the standard rate for a car was £195 a year and the expensive car supplement was £425 a year, giving a combined annual bill of £620 for a car caught by the rules. The 2026/27 figures are set out in the DVLA rate tables.

Using the 2025/26 rates to show the arithmetic:

Over the five chargeable years that is 5 × £425 = £2,125 of supplement, on top of 5 × £195 = £975 of standard rate — a total of £3,100 in road tax between the first and seventh birthdays of the car. Because the rates rise most years, the real-world total for a car taxed over 2026/27 and beyond will be a little higher.

Paying by monthly or six-monthly instalments adds a surcharge, so spreading the cost makes an already expensive licence slightly more expensive again.

It is the list price, not the price you paid

This is the single biggest source of confusion. The £40,000 test uses the published list price of the vehicle at the time it was first registered, including any extras fitted before registration. What you actually handed over is irrelevant.

The list price normally includes:

• the manufacturer's recommended retail price for that model and specification
• factory-fitted options — bigger wheels, upgraded paint, technology packs, tow bars
• accessories fitted by the dealer before the car was first registered
• delivery and pre-delivery inspection charges
• VAT

It excludes the one-off first registration fee and the vehicle tax itself. Accessories genuinely added after first registration do not count, although in practice most extras are specified and fitted before the plates go on.

Worked example: the options trap

Two buyers order the same model with a £38,500 base list price.

• Buyer A takes the car as standard and negotiates £2,000 off. Invoice price £36,500, list price £38,500. Under £40,000, so no supplement. Road tax for years 2–6 is the standard rate only.
• Buyer B adds a £1,200 paint option, a £900 driver assistance pack and a £600 dealer-fitted tow bar, then negotiates £3,000 off. Invoice price £38,200 — less than Buyer A paid. But the list price is £38,500 + £1,200 + £900 + £600 = £41,200, so the supplement applies.

On 2025/26 rates, Buyer B pays £2,125 more road tax over five years than Buyer A, despite paying less for the car. Three options worth £2,700 triggered a £2,125 tax cost. That is why it is worth knowing exactly where the specification sits relative to the threshold before signing the order form.

How long you pay it for

The supplement is charged on the second to sixth annual licences — five payments in total — and then stops. It is tied to the date of first registration, not to when you bought the car.

So a car first registered in June 2023 pays the supplement on the licences running from June 2024 to June 2029, and from June 2029 reverts to the plain standard rate.

Buying second-hand

The liability follows the vehicle. If you buy a two-year-old car that cost £52,000 new, you inherit the remaining years of the supplement — roughly three more annual licences. Nothing about the used price you paid changes that.

This matters when comparing two similar used cars: a former £45,000 car and a former £38,000 car might now sell for much the same money, but the first one comes with several hundred pounds a year of extra tax attached until its sixth birthday. Before you buy, check the vehicle's tax cost using the GOV.UK vehicle tax checker or run the numbers with our car tax calculator.

What changed for electric cars

Until 31 March 2025, zero-emission cars paid no Vehicle Excise Duty at all and were outside the expensive car supplement. From 1 April 2025 that ended: electric cars joined the standard VED system, paying a nominal first-year rate and then the standard rate from year two.

At the same time, the supplement began to apply to zero-emission cars registered on or after 1 April 2025 with a list price over £40,000. Because electric cars are typically more expensive than equivalent petrol models, a large share of new EVs were immediately caught. Electric cars registered before 1 April 2025 pay the standard rate but are not brought into the supplement.

The new EV threshold

After considerable pressure from the motor industry, the government has legislated to raise the expensive car supplement threshold for zero-emission cars from £40,000 to £50,000, while leaving the £40,000 threshold in place for petrol, diesel and hybrid cars. The intention is that a mainstream family electric car should no longer be treated as a luxury purchase.

Two points to pin down before you rely on it: the exact date the higher threshold takes effect, and whether it applies only to cars registered on or after that date or also to recently registered EVs still inside their five-year window.

Note also that the £40,000 figure has not moved since the system began in April 2017. Had it tracked inflation it would be well above £50,000 by now, which is why so many ordinary cars — not just luxury ones — now pay it.

Can you avoid the expensive car supplement?

There is no relief to claim and no way to appeal a car over the threshold. The only real lever is the specification and registration date of the car you choose.

• Watch the options list. Ask the dealer for the total list price including every extra and delivery charge, then compare it to £40,000 (or £50,000 for a zero-emission car). A single option can cost you five years of supplement.
• Consider a lower trim level. Dropping one grade is often the difference between sitting just under and just over the line.
• Buy a car aged over six. Once the sixth licence has been paid, the supplement ends permanently and the car reverts to the standard rate.
• Check the registration date on used EVs. Electric cars registered before April 2025 sit outside the supplement altogether.
• Do not assume leasing avoids it. The leasing company pays the VED, but the cost is built into your monthly rental. Personal contract hire on a £45,000 car reflects the supplement whether or not it is itemised.

Two things the supplement is not. It is not a company car tax rule: benefit-in-kind on a company car is worked out from the P11D price and CO2 emissions, and the £40,000 threshold plays no part in that calculation. And it is not affected by your income or tax code — Vehicle Excise Duty is a flat charge on the vehicle, so a basic-rate taxpayer and an additional-rate taxpayer pay exactly the same.

Cars in an exempt tax class, such as those taxed in the disabled exemption class, pay no VED and therefore no supplement, though the vehicle still has to be taxed each year at a nil rate.

What to do next

If you are choosing between two cars, work out the full six-year tax cost rather than just the first-year figure — the supplement can easily outweigh a small difference in purchase price. Our car tax calculator will show you the annual cost including the expensive car supplement, so you can see where the £40,000 line falls on your shortlist.

For the official annual amounts, the DVLA publishes the full vehicle tax rate tables on GOV.UK, and you can confirm an individual car's tax position with the vehicle tax checker.