More than 420,000 drivers were pushed into paying the UK’s luxury vehicle tax last year as frozen thresholds dragged an increasing number of ordinary cars into the surcharge, new DVLA data shows.
The number of motorists hit by the so-called “expensive car supplement” has risen by 42pc in just two years, climbing from 299,553 in 2022–23 to 426,758 in 2024–25.
The levy applies to any car with a list price above £40,000 and costs owners £425 a year between a vehicle’s second and sixth years on the road — amounting to £2,125 in total. The threshold has been unchanged since 2017 for petrol, diesel and hybrid cars, meaning inflation has steadily pulled many mainstream models into the tax band.
Electric vehicles were previously exempt, but from April this year 119,000 EV buyers whose cars exceeded the £40,000 price point became liable in just the five months to September.
Brian Macdowell of the Alliance of British Drivers criticised the surcharge, calling it a “stealth tax” driven by “the politics of envy”.
Because the threshold has not risen with inflation, cars such as the Peugeot 5008, VW Golf Match and high-spec Kia Sportage—vehicles not typically viewed as luxury models—now fall within the tax net. If adjusted for inflation, the threshold would stand near £53,968 today.
luxury models have become the most common entrants into the surcharge, with 248,000 liable in 2024–25, more than double the total two years earlier. Analysts say the shift reflects growing hybrid adoption and the rising price of well-equipped family SUVs.
A further quirk is that the tax remains payable even when a vehicle changes hands, regardless of its used-market value. A driver buying a four-year-old car for £20,000 must still pay the levy for two more years if it originally cost more than £40,000.
The Government defended the system. A Treasury spokesperson said: “It’s right that owners of luxury cars should contribute more,” adding that two-thirds of new petrol, diesel and hybrid cars remain below the threshold. The Chancellor has pledged to raise the threshold to £50,000 next year — but only for fully electric vehicles — a move expected to cost the Treasury £1.2bn over five years while encouraging EV uptake.
