Luxury Car Tax in the UK: Understanding the £40k Rule
When purchasing a new car valued over £40,000, an additional annual luxury car tax, officially known as the Expensive Car Supplement (ECS), applies.
The rules, costs, and methods to minimize the tax bill are explained below, following changes to Vehicle Excise Duty (VED) in April 2025.
These changes affected all types of cars, including electric vehicles (EVs), which lost their VED exemption and are now subject to the luxury car tax if their new price exceeds £40,000, a rule that applied to non-EVs since April 2017.
The Expensive Car Supplement (ECS) is the official term for the luxury car tax.
- Electric vehicles (EVs) are subject to the luxury car tax if priced over £40,000.
- Non-EVs have been subject to the same rule since April 2017.
Author's summary: Luxury car tax applies to new cars over £40,000.
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