Chancellor Urged to Remove ‘Luxury’ Car Tax to Boost Electric Vehicle Sales
The National Franchised Dealers Association (NFDA) has called on Chancellor Rachel Reeves to reconsider certain car tax measures that may discourage drivers from switching to electric vehicles. As of April 2025, electric vehicle owners are required to pay the Expensive Car Supplement for the first time, sparking concerns among industry experts.
The Expensive Car Supplement, also known as the ‘luxury’ car tax, is a yearly fee of £425 applied to vehicles priced over £40,000. Experts warn that this new tax could undermine the progress made by fleets and carmakers in meeting the Zero Emission Vehicle (ZEV) mandate, which requires all new car sales to be electric or hybrid by 2030.
Sue Robinson, Chief Executive of the NFDA, expressed concerns that the tax change could discourage consumers from adopting electric vehicles. “The Expensive Car Supplement is a noteworthy tax change which could potentially dissuade consumers from switching to electric,” she told GB News.
The NFDA has urged the Government to reconsider the tax burden on electric vehicles and to reintroduce incentives such as the Plug-In Car Grant, which was discontinued after providing discounts of up to £5,000 on eligible electric cars. The association believes that more fiscal incentives are needed to meet the expected targets and counter the effects of the April policy changes on the EV market.
In response to the tax changes, some car manufacturers like Vauxhall have taken steps to reduce the prices of their electric vehicles to avoid the £40,000 threshold. Eurig Druce, Managing Director of Vauxhall, stated that the company is committed to making electric mobility accessible and affordable for British drivers.
Industry experts argue that the £40,000 threshold for the Expensive Car Supplement has not been adjusted since 2017 and no longer reflects current car prices, which have risen significantly due to inflation. They suggest that the threshold should be revised to avoid unfairly penalizing drivers.
The debate highlights the challenges in transitioning to electric vehicles while balancing tax policies. As the UK aims to meet its ZEV mandate targets, the industry awaits the Government’s response to the concerns raised by the NFDA and other stakeholders.
