Labour Plans to Reconsider ‘Luxury’ Car Tax on Electric Vehicles
The UK Labour government is contemplating changes to the controversial ‘luxury car tax,’ known as the Expensive Car Supplement, which affects millions of electric vehicle (EV) owners. This tax development is expected to be further discussed during the Autumn Budget.
The Expensive Car Supplement is an additional yearly fee of £425 imposed on vehicles with a retail price exceeding £40,000. This tax has been a subject of contention since electric vehicles became subject to it starting April 1, alongside the Vehicle Excise Duty.
Roads Minister Lilian Greenwood indicated in a leaked government letter that the threshold for this tax might be revised “to make it easier to buy electric cars.” The current £40,000 threshold, unchanged since 2017, no longer accurately reflects today’s car prices, which would be approximately £50,000 when adjusted for inflation.
Industry experts have warned that the tax has led to a drop in EV sales and risks manufacturers facing challenges in meeting the Zero Emission Vehicle mandate, potentially resulting in significant fines. The tax affects not only new but also used EV buyers if the original purchase price was over £40,000, regardless of the vehicle’s current value.
Leading motor dealers have welcomed the proposed changes as “a move in the right direction” to boost consumer confidence in purchasing EVs. However, they emphasize that more substantial support is needed to invigorate the sluggish electric car market.
Chris Rosamond, current affairs editor at Auto Express, noted that revising or scrapping the luxury car tax “is a welcome if overdue glimmer of hope for a struggling EV market.” He cautioned that delaying changes until the Autumn Budget “risks adding more uncertainty into an already fragile market,” potentially causing buyers to delay EV purchases in hopes of avoiding the tax altogether.
The government’s consideration of these changes aligns with its stated commitment to decarbonizing cars and vans, as well as protecting jobs and encouraging future investment in the automotive sector.
