Advice
What is luxury car tax?
In this complete guide to luxury car tax, we explain how the £40k threshold for car prices works, as well as the new £50k limit being introduced for electric cars from April 2026 onwards.
Words by: Nimisha Jain
Published on 24 February 2026 | 0 min read
• Luxury car tax is a surcharge paid by cars costing more than £40,000.
• Luxury car tax is paid on top of the regular car tax (vehicle excise duty) which is paid by all car owners. • Luxury car tax is formally known as Expensive Car Supplement (ECS) but to keep it simple, we’ll be referring to it as ‘luxury car tax’ in this article. When you're trying to find a car within your budget, it's not just the asking price you need to consider. Factors like tax, insurance, and fuel quickly add up and determine what the true running cost of the car will be. One of these factors that you need to consider is if you'll have to pay luxury car tax or not. So if you’re thinking of buying a car, we’re here to help. In this article, we explain what luxury tax means, who does it apply to, and what are the changes being introduced from April 2026 onwards.
• Luxury car tax is paid on top of the regular car tax (vehicle excise duty) which is paid by all car owners. • Luxury car tax is formally known as Expensive Car Supplement (ECS) but to keep it simple, we’ll be referring to it as ‘luxury car tax’ in this article. When you're trying to find a car within your budget, it's not just the asking price you need to consider. Factors like tax, insurance, and fuel quickly add up and determine what the true running cost of the car will be. One of these factors that you need to consider is if you'll have to pay luxury car tax or not. So if you’re thinking of buying a car, we’re here to help. In this article, we explain what luxury tax means, who does it apply to, and what are the changes being introduced from April 2026 onwards.
What is luxury car tax?
All cars over the price of £40,000 are subject to ‘luxury car tax’ - formally known as Expensive Car Supplement (ECS).
Starting in the second year of registration, you'll pay it for five consecutive years. After the seventh year of registration, you'll only have to pay the basic car tax rate.
Starting in the second year of registration, you'll pay it for five consecutive years. After the seventh year of registration, you'll only have to pay the basic car tax rate.
Changes to luxury car tax from April 2026
While the government announced that electric vehicles will start paying car tax from April 2025 onwards, the rules for luxury car tax have been updated to be more generous. From April 2026 onwards, the luxury tax threshold for zero-emission cars will increase from £40,000 to £50,000. This change also applies retrospectively to all electric cars registered on or after 1 April 2025.
So, for example, if you bought an electric car for £45,000 in mid-2025, you’ll effectively ‘skip’ paying the luxury tax. Under the old rules, you would’ve been liable, but because the threshold has been raised to £50,000, you will now only pay the standard yearly tax rate. Related: Autumn budget 2025 summarised for car owners
So, for example, if you bought an electric car for £45,000 in mid-2025, you’ll effectively ‘skip’ paying the luxury tax. Under the old rules, you would’ve been liable, but because the threshold has been raised to £50,000, you will now only pay the standard yearly tax rate. Related: Autumn budget 2025 summarised for car owners
Do I have to pay luxury car tax?
You’ll be liable for the luxury car tax if your car's total value price exceeds the government thresholds i.e. £50,000 for fully electric cars, and £40,000 for all other cars.
To find out the total value of your car, you should look at: • The list price of the car – this is the price of the car when it left the factory • Include any factory-fitted optional extras added to your car – even minor upgrades to your car, such as premium paint or an upgraded infotainment system, should be included Remember, any dealer discounts or incentives are ignored for tax purposes, so even if you paid below the government thresholds, you will still be required to pay the luxury car tax if the vehicle's original list price and optional extras pushed it into the taxable bracket.
To find out the total value of your car, you should look at: • The list price of the car – this is the price of the car when it left the factory • Include any factory-fitted optional extras added to your car – even minor upgrades to your car, such as premium paint or an upgraded infotainment system, should be included Remember, any dealer discounts or incentives are ignored for tax purposes, so even if you paid below the government thresholds, you will still be required to pay the luxury car tax if the vehicle's original list price and optional extras pushed it into the taxable bracket.
How to check my total car tax?
You can check how much tax you’re due to pay on Gov.uk. Simply enter your registration number, and you’ll get a breakdown of your current tax rate. It’ll tell you if an additional rate applies to the vehicle for the luxury car tax, and if so, until when.
FAQs:
When did luxury car tax start?
The luxury car tax was introduced on 1 April 2017 for vehicles with a list price over £40,000. While electric vehicles and low emission cars were originally exempt, those registered on or after 1 April 2025 are now also liable. The surcharge started at £310 per year in 2017 and currently stands at £425.
How long do you pay luxury car tax for?
You’re liable for the luxury car tax for five years, spanning from the start of the vehicle's second year of registration up to the end of its sixth year. From year seven onwards, you only have to pay the basic car tax rate.
Does luxury car tax apply to used cars?
Yes, luxury car tax can apply to used cars depending on the list price of the car and how old the car is. If you buy a used car that was originally liable for the tax, you must continue paying the supplement until the vehicle is six years old.
Does luxury car tax apply to leased cars?
Yes, the tax applies to leased vehicles just as it does to owned ones, so if you lease a car that has a list price higher than £40,000 (or £50,000 for electric cars), then you’ll be subject to the luxury car tax.
The tax may already be factored into your monthly lease deal since most leasing companies pay the tax to the DVLA as they’re the registered owner of the car. Looking for a new car that falls within the luxury car tax threshold? Browse on Autotrader today to find the car of your dreams.
The tax may already be factored into your monthly lease deal since most leasing companies pay the tax to the DVLA as they’re the registered owner of the car. Looking for a new car that falls within the luxury car tax threshold? Browse on Autotrader today to find the car of your dreams.