Diesel and Petrol Buyers Face £2,200 in Extra Tax That Same Priced EVs Now Skip

• From 1 April 2026, electric cars only pay the Expensive Car Supplement above £50,000, while petrol, diesel and hybrid cars still pay it above £40,000.
• The supplement adds £440 a year for five years, a total of £2,200, on top of standard road tax.
• More than seven in ten new car models now list above £40,000, so the £10,000 gap catches ordinary family SUVs, not just supercars.

Two Buyers, One Price Tag, Two Very Different Tax Bills

Two neighbours buy a car priced at £45,000 this month. One drives home in an electric SUV and pays nothing extra. The other drives home in a diesel or petrol equivalent and signs up for five years of a tax surcharge that will add £2,200 to the bill by the time it ends. Same showroom, same price, same road, and a £2,200 gap that has nothing to do with how the car performs or how much it pollutes on the day it is registered.

This is the result of a quiet change buried inside the Autumn Budget 2025 and now live at the DVLA. It creates two separate thresholds for the same tax, the Expensive Car Supplement, depending only on what powers the car under the bonnet.

What Changed and When

The Expensive Car Supplement is a Vehicle Excise Duty surcharge that applies on top of standard road tax for cars with a list price over a set threshold. It runs for five years, covering years two through six after first registration, and stops after that.

Until March 2026, every car paid the supplement once its list price passed £40,000, electric or not. HM Treasury moved that line for electric cars only. Any zero-emission car registered on or after 1 April 2026 with a list price up to £50,000 now avoids the supplement completely. Petrol, diesel, hybrid and plug-in hybrid cars stay on the original £40,000 line.

The supplement itself also rose. It cost £425 a year in 2025. From 1 April 2026 it is £440 a year, so a car that stays above its threshold for the full five-year window adds £2,200 to its running costs, a figure that rarely appears on a finance quote or a dealer’s monthly payment sheet.

Who Actually Gets Caught by the £40,000 Line

The £40,000 threshold has not moved from its 2017 starting point. Car prices have. Trade body BVRLA has told the Treasury directly that more than seven in ten new car models on sale in Britain now carry a list price above £40,000 once a mid-range trim and a handful of common options are added. That is not a list of luxury cars. It covers a well-optioned Volvo XC90 diesel, a top-spec Kia Sportage, a Ford Ranger double cab, and plenty of ordinary family SUVs and estates bought on finance by drivers who never thought of themselves as buying an expensive car.

A car that cost £34,000 new in 2017, the year the threshold was set, would cost roughly £43,000 today after eight years of ordinary price inflation in the new car market. That car has not become more luxurious. It has simply kept pace with the cost of steel, semiconductors and factory labour, and it now crosses a tax line that was never designed to move with it. No equivalent inflation adjustment applies to the £40,000 figure, and none is currently planned by the Treasury.

Fleet buyers feel this most sharply. A company car chosen from the £38,000 to £45,000 bracket, the exact range where most mid-size SUVs and executive saloons sit, now carries a materially different five-year tax bill depending on fuel type alone. A finance manager comparing two shortlisted models for a company fleet order now has to run the Expensive Car Supplement calculation separately for each fuel type. The same list price no longer produces the same tax outcome, and a spreadsheet built on last year’s assumptions will get the comparison wrong.

List price includes the car and any factory-fitted options, delivery and number plates, not just the headline figure quoted in an advert. A driver who adds a tow bar, a bigger wheel size or a premium paint finish can push a £38,000 car over the line without realising it until the first renewal reminder lands.

Electric buyers face the same list-price trap, only ten thousand pounds further up the scale. A well-specified electric SUV priced at £48,000 clears the new £50,000 threshold and pays nothing extra. A diesel version of the same model at the same price pays the full supplement for five years.

Why the Industry Pushed for the Split

BVRLA had asked the Treasury for a separate, higher threshold for electric cars in successive budget submissions. Its argument was that electric cars cost more to build than petrol or diesel equivalents, so a flat £40,000 line was pushing buyers away from zero-emission models right as the government wants sales to rise under the ZEV mandate.

The Treasury agreed, but only for electric cars. Petrol, diesel and hybrid buyers were left on the old threshold, with no adjustment for eight years of car price inflation. A car that cost £35,000 in 2017 and would clear £40,000 today after normal price rises now pays a tax its equivalent avoided when the threshold was set.

Working Out the Actual Difference in Pounds

Take a £46,000 mid-size SUV, a common price for a well-equipped family car in 2026. The electric version clears the road at £46,000, sits under the new £50,000 line, and pays only the standard VED rate every year. The diesel version, priced identically, sits above the old £40,000 line and pays the standard rate plus £440 a year for five years.

Over the full five-year supplement window that adds £2,200 to the diesel buyer’s running costs, money that never appears on the windscreen sticker or the finance quote handed over at the point of sale. Spread across sixty monthly payments on a typical PCP deal, it works out at roughly £37 a month that the diesel buyer pays and the electric buyer, on an identically priced car, does not.

What You Can Do Before You Sign

Check the full list price before ordering, not the trim-level headline figure. Ask the dealer for the exact on-the-road price used for VED purposes, including any factory options, and get it in writing.

If a car is close to £40,000, dropping one option pack or a wheel upgrade can keep it under the line and save £2,200 over five years. Registration date sets the five-year clock, so a car ordered in March and registered in early April falls under whichever rules apply on the day it is first taxed, not the day it was ordered.

Anyone cross-shopping a petrol or diesel model against an electric equivalent should run both list prices through the government’s vehicle tax checker before signing anything. The £10,000 gap between the two thresholds can be worth more over five years than many of the optional extras a dealer will try to add to the order.

Second-hand buyers get a partial reprieve. The Expensive Car Supplement attaches to the first six years of a car’s life from its original registration date, so a used petrol or diesel car bought at four or five years old may only carry the supplement for its final year or two, rather than the full five-year run a first owner pays. A used buyer checking the V5C logbook can work out exactly how many months of supplement remain before it drops away for good, which can turn an apparently expensive used SUV into a far cheaper ownership proposition than the same model bought new.

The wider question is whether the Treasury extends inflation-linked movement to the standard £40,000 line in a future budget, closing the gap it has just opened for electric cars. Industry bodies including the BVRLA continue to press for the change. Until that happens, two drivers parking identically priced cars on the same street will keep paying very different amounts to the DVLA for the privilege.

Sources:

• GOV.UK: Increase in the VED Expensive Car Supplement threshold for zero emission cars
• BVRLA: VED changes, Expensive Car Supplement for EVs
• House of Commons Library: Vehicle excise duty and zero emission vehicles
• Motoring Chronicle: The frozen £40,000 car tax threshold is now catching Golf GTIs, Ford Kugas and Skoda Kodiaq drivers
• Motoring Chronicle: EV home charging gets cheaper in October but drivers without a driveway will be left behind