Luxury Car Tax – Everything You Need to Know in 2026

Luxury car tax in the UK is evolving fast. The 2026 reforms ensure drivers of premium cars, SUVs, and high-value EVs contribute the same as everyone else. If you're planning to register a vehicle that costs more than £40,000, this guide explains how much luxury car tax you'll pay, why electric car luxury tax is now unavoidable, and how to keep costs under control.

Already comparing figures? Use our free MOT and tax checker or jump straight to the April 2026 car tax changes breakdown for deeper context.

How luxury car tax uk works in 2026

The prestige supplement (sometimes called luxury car tax) is layered on top of standard VED. From April 2026 it applies to every fuel type, including electric vehicles. If the list price – including factory options and VAT – crosses £40,000, you owe the £390 supplement for the five renewals following the first year on the road.

• Cars with a list price above £40,000 pay the prestige supplement (£390) for years two through six, even if they are fully electric.
• Fleet buyers can trim exposure by choosing specifications that slip under the £40,000 threshold – optional extras count toward the list price.
• EV owners should budget for the standard VED rate (forecast at ~£190) after year one in addition to the luxury levy.
• Leased vehicles are not exempt: finance providers pass the higher VED directly into monthly rentals.
• Business owners can offset part of the cost via capital allowances, but the cash still leaves the account upfront.

Electric car luxury tax – the new normal

EVs previously enjoyed a total VED exemption, but 2026 closes that window. Owners now pay:

• Year one: £0 (first-year zero-emission rate still applies).
• Years two–six: £190 standard rate (forecast) + £390 prestige supplement if the car cost over £40,000.
• Year seven onwards: only the standard rate remains.

That means car tax on electric cars over £40,000 will reach roughly £580 per year between years two and six. Use our car tax check tool to confirm the exact figure for your model, and read the electric car road tax guide for a deeper dive into EV-specific rates.

Timeline for the 2026 reforms

Staying organised avoids nasty surprises. Here's how the luxury car tax increase rolls out:

• January 2026: Audit your garage for vehicles with a list price above £40,000 and capture precise OTR values including optional packs.
• April 2026: New registrations fall under the refreshed luxury car tax regime, and zero-emission models begin paying both standard VED and the prestige supplement.
• July 2026: First annual renewal for April registrations – expect DVLA reminders pointing to the £190 standard rate plus the £390 luxury levy.
• October 2026: HM Treasury reviews revenue ahead of CPI adjustments for 2027; keep an eye on consultation papers for further tweaks.

Strategies to keep luxury car tax in check

1. Order vehicles with essential options only so you stay below the £40,000 threshold where possible.
2. Consider nearly-new purchases: once the supplement period ends, later owners pay only the standard rate.
3. If you run a fleet, stagger replacements so not every prestige car renews during the same tax year.
4. Leverage salary-sacrifice EV schemes but model the additional £390 supplement so staff understand the true net benefit.
5. Bookmark our MOT and tax checker and set reminders before each renewal.

Related guides

Need more detail on the wider reforms? Read our Car Tax Changes April 2026 deep dive, or explore manufacturer-specific rates via the Car Tax Check hub.