Luxury car shake-up as 23 popular EVs removed from £425 tax trap | Personal Finance | Finance
Motorists buying electric cars are being handed a significant tax break after the Government raised the “luxury car tax” threshold by 25%.
The Expensive Car Supplement threshold has increased from £40,000 to £50,000 for zero-emission vehicles. This means that a swathe of models that previously triggered the charge will now avoid it altogether. Under the old rules, drivers buying cars priced above £40,000 faced an extra £425 a year for five years on top of standard vehicle tax – a total bill of £2,125.
But electric vehicles costing under £50,000 and registered from 2025 onwards are exempt from the surcharge, significantly reducing ownership costs for many buyers.
The boost for EVs comes at the same time as there has been a huge increase in buyers looking to switch to battery cars against the background of the Middle East energy price shock that has pushed up the price of unleaded and diesel.
Analysis by car marketplace Carwow shows at least 23 electric models – priced between £40,000 and £50,000 – will now fall below the luxury car tax threshold. These include a mix of premium SUVs, saloons and family cars from major manufacturers.
EVs now avoiding the £425-a-year surcharge
- Audi Q4 e-tron
- Audi Q4 Sportback e-tron
- BMW iX1
- BMW iX2
- BYD Seal
- BYD Sealion 7
- Cupra Tavascan
- Ford Capri
- Hyundai Ioniq 5
- Hyundai Ioniq 6
- Kia EV4 Fastback
- Lexus RZ
- Mercedes-Benz CLA Electric
- Mercedes-Benz EQA
- Mercedes-Benz GLB Electric
- MG IM6
- Peugeot E-3008
- Peugeot E-5008
- Polestar 2
- Skoda Enyaq Coupe
- Tesla Model 3 (Premium)
- Tesla Model Y
- Tesla Model Y (Premium)
The change means buyers can now opt for better-equipped versions of these cars without automatically being pushed into the surcharge bracket.
However, eligibility still depends on the final purchase price – including trims, battery upgrades and optional extras. Any version exceeding £50,000 will still incur the charge.
Siobhan Doyle, Consumer Writer at Carwow, said: “With more EVs now falling below the tax threshold, drivers have a wider choice of models that combine strong value with lower ownership costs.
“However, it’s important to note that the expensive car supplement is implemented based on the purchase price of the car, meaning that not all versions of a model will necessarily be eligible.
“For example, if you go for a higher-specification trim, bigger battery, or simply pile on the optional extras, you could be charged extra if the car’s value exceeds £50,000.”
Industry analysis highlights that the policy shift widens choice in the mid-market EV sector, where many popular models had previously been caught just above the old £40,000 threshold.
Carwow also highlighted a handful of models it believes stand out under the new rules. On the Hyundai Ioniq 5, Ms Doyle said: “The Ioniq 5’s design is eye-catching, and its interior is spacious and nicely finished.
“While some alternatives may offer longer range or larger boots, if you want an EV which is roomy, practical, thoughtfully designed, and stylish enough to turn heads, the Hyundai Ioniq 5 is an excellent choice.”
Discussing the Mercedes CLA Electric, she added: “The Mercedes CLA Electric is a handsome little thing and absolutely packed with clever tech.
“It’s great to drive and has one of the longest ranges of any EV on sale in the UK.”
On the Polestar 2, she said: “This stylish electric hatchback offers sleek design, agile handling, and engaging performance… build quality is excellent, and range is solid, making it a strong contender on any EV shortlist.”
For family buyers, she highlighted the Skoda Enyaq: “This electric SUV from Skoda is a fantastic all-rounder, with a spacious cabin, huge boot, and comfy suspension paired with good range.”
And on the Tesla Model 3 Premium, she said: “It offers a claimed range of up to 436 miles and centres around a large 15.4-inch touchscreen that controls nearly everything – slick, but not instantly intuitive.”
The move comes as ministers continue efforts to accelerate EV uptake while balancing falling incentives and rising upfront costs for motorists.
