Luxury car tax UK 2026: £440 supplement, £40k and £50k rules
Luxury car tax explained: the £440 expensive car supplement, the £40,000 and £50,000 EV thresholds, what counts as list price and how it affects used car values.
· 7 min read
"Luxury car tax" is the everyday name for the UK's expensive car supplement: an extra £440 a year of vehicle tax, on top of the £200 standard rate, for cars first registered on or after 1 April 2017 whose list price was over £40,000. It is paid for five years, from the second time the car is taxed (years 2 to 6). Since 1 April 2026, fully electric cars only pay it if their list price was over £50,000. The supplement is tied to the car's original list price, not what you paid for it, so it also hits buyers of used cars.
How much is the luxury car tax in 2026?
The rates below apply to car tax taken out from 1 April 2026 to 31 March 2027.
| Payment | Standard rate | With expensive car supplement |
|---|---|---|
| 12 months, single payment | £200 | £640 |
| 12 monthly Direct Debit payments (total) | £210 | £672 |
| 6 months, single payment | £110 | £352 |
In other words, the supplement itself is £440 a year, up from £425 in 2025/26. Over the full five years that is more than £2,000 on top of normal vehicle tax, which is why it matters both to buyers and to anyone pricing stock.
Which cars pay it: the £40,000 and £50,000 thresholds
| Car | Threshold | Notes |
|---|---|---|
| Petrol, diesel, hybrid, plug-in hybrid | list price over £40,000 | applies to cars first registered from 1 April 2017 |
| Zero-emission (fully electric) registered from 1 April 2025 | list price over £50,000 | higher threshold applies to tax taken out from 1 April 2026 |
| Zero-emission registered before 1 April 2025 | exempt from the supplement | these cars now pay the standard rate |
| Cars first registered before 1 April 2017 | no supplement | taxed under the older CO2-band system |
A few points that catch people out:
- Hybrids are not zero-emission. Plug-in and full hybrids stay on the £40,000 threshold.
- EVs between £40,000 and £50,000 do not pay it on licences taken out from 1 April 2026. Because the supplement only starts with the second tax payment, electric cars registered from April 2025 in this price band reach their first renewal under the new threshold.
- The first year is different. The first tax payment is based on CO2 emissions and does not include the supplement. New electric cars pay a £10 first-year rate, which is fixed until March 2030.
The wider picture of how EVs are taxed across Europe is covered in our guide to electric car tax in Europe.
For car dealers
Know your margin before you buy
MyCarDealer compares any car from an auction or listing with the market in your country and shows the net margin after VAT, transport and costs – and the maximum bid.
Request accessWhat counts as the "list price"
This is where most mistakes happen. For the expensive car supplement, the list price is the manufacturer's full advertised price for the car before any discounts or grants. It includes:
- optional extras fitted by the manufacturer when the car was new,
- VAT,
- delivery charges and the cost of the pre-delivery inspection.
It does not include the first licence, the first registration fee or accessories that were not fitted by the manufacturer.
Two consequences follow:
- A car can cross the line because of its options. A model with a base price of £38,000 and £3,000 of factory options has a list price above £40,000 and pays the supplement.
- Discounts don't help. If the list price was £42,000 and the buyer negotiated it down to £37,000, the supplement still applies.
If in doubt, the amount due appears when the car is taxed and on the tax renewal reminder. Dealers should check it for every car in the £35,000–£55,000 list price range rather than guessing from the model name.
Luxury car tax on used cars
The supplement stays with the car for years 2 to 6, regardless of who owns it or what it is worth now. That creates some uncomfortable situations:
- A four-year-old executive saloon bought for £18,000 can still cost £640 a year to tax if its list price was over £40,000 when new.
- A three-year-old premium SUV may have two or three supplement years left; the next owner pays them.
- Once the car reaches its sixth year of tax, the supplement drops off and it pays the standard rate.
For buyers, this is part of the running cost. For sellers and dealers, it is part of the price. A car with several supplement years remaining competes against similar cars that pay £200 a year, and informed buyers will factor in the difference.
What it means for dealers
The expensive car supplement has a measurable effect on the used market around the thresholds:
- Stock just under £40,000 list price is easier to sell than a slightly better-specced version just over it, because the running cost is lower.
- Cars in years 2 to 4 carry the biggest burden. When pricing, count the remaining supplement years: three years left is £1,320 of extra tax for the next owner.
- Year 6 is a turning point. A car about to leave the supplement period is easier to sell to tax-conscious private buyers.
- EVs between £40,000 and £50,000 avoid the supplement under the £50,000 threshold, which gives them a running-cost advantage over similarly priced petrol and hybrid cars that still pay it.
- Be transparent. Put the annual tax figure in the advert or on the windscreen card. A buyer who discovers a £640 tax bill after purchase is a buyer who leaves a bad review.
Pricing these cars well means comparing like with like: same engine, trim, age and mileage, and the same tax position. Our guide to used car pricing strategy goes through the method, and the MyCarDealer market price shows what comparable cars are actually listed for.
Exporting and importing cars with the supplement
The supplement is a UK vehicle tax, so it ends when a car leaves the UK register. Cars exported to the EU or Ireland are taxed under the destination country's rules instead – in Ireland that means VRT on registration (see VRT on imported used cars), elsewhere a mix of registration and annual taxes compared in our car registration tax in Europe overview. For UK cars with several supplement years left, a buyer abroad does not price in that cost, which can make export more attractive – the paperwork is covered in exporting a car from the UK to the EU.
Frequently asked questions
How much is the luxury car tax?
From 1 April 2026 the expensive car supplement is £440 a year on top of the £200 standard rate, so £640 a year in total for a single 12-month payment. It is paid for five years, from the second year the car is taxed.
Does luxury car tax apply to electric cars?
Yes, for electric cars registered from 1 April 2025. From 1 April 2026 they only pay it if their list price was over £50,000. Electric cars registered before 1 April 2025 do not pay the supplement.
Do I pay luxury car tax on a used car?
Yes, if the car was first registered on or after 1 April 2017, its list price was over the threshold and it is still in years 2 to 6 of being taxed. The supplement depends on the original list price, not on what you paid for the car.
Does the list price include optional extras?
Yes. Options fitted by the manufacturer when the car was new, VAT, delivery and the pre-delivery inspection all count. Discounts and grants are ignored, and accessories not fitted by the manufacturer are excluded.
When does the luxury car tax stop?
After five annual payments. The supplement starts with the second tax payment and ends after the sixth year of tax, after which the car pays only the standard rate.