Whether you drive a petrol, diesel, hybrid or electric car, the start of this tax year has brought changes to how much you pay in road tax. Several updates to Vehicle Excise Duty (VED) - the formal name for car tax - have taken effect from 1 April 2026. Standard rates have edged up, company car tax has shifted slightly, and there is a significant change for electric vehicle buyers in particular that is worth understanding in full. 

The Expensive Car Supplement - widely known as the "luxury car tax" - is an additional charge on top of standard road tax. It applies to vehicles whose original manufacturer's list price exceeds a set threshold, and is charged annually for five years, starting from the second year of registration. 

Under the previous rules, any cars priced above £40,000 attracted the supplement, regardless of whether it was petrol, diesel, or electric. For many electric vehicles - particularly family-sized SUVs that routinely sat in the £40,000-£50,000 bracket - this created an awkward situation: buyers of practical, everyday EVs were being taxed as though they were purchasing luxury vehicles. 

Here is a clear summary of all the car tax changes that have come into effect this month:

The practical effect is significant. A wide range of popular EVs that previously crossed the £40,000 threshold now fall comfortably within the £50,000 limit. Models like the Tesla Model Y, Skoda Enyaq, Audi Q4 e-Tron, and BMW iX1 - in many of their common trims - are now fully exempt from the supplement. Industry estimates suggest that a significant share of new EV models have list prices above £40,000, meaning this change affects a broad portion of the market. 

This policy reflects a recognition that electric vehicles have historically carried higher upfront costs than equivalent petrol or diesel alternatives - in part due to battery costs - and that taxing a £45,000 family SUV as a "luxury" item was not an accurate reflection of how most buyers were using these cars. 

There is also a detail worth understanding about how the supplement is calculated: it is based on the vehicle's official manufacturer's list price - including any optional extras specified at the point of order - not the price you may negotiate at a dealership or pay second-hand. A used car bought for £38,000 can still attract the supplement if its original list price exceeded the relevant threshold when new. 

If you use an electric vehicle as a company car, your Benefit-in-Kind (BiK) rate has moved from 3% to 4% for the 2026/27 tax year. BiK determines how much income you pay on the personal use of your company vehicle. While this will slightly increase monthly tax deductions, electric company cars remain substantially cheaper to run from a tax perspective than petrol or diesel equivalents. The government has confirmed a gradual phased increase in EV BiK rates through to 2030, giving company car drivers and fleet managers time to plan ahead. 

The flat standard rate of VED - which applies to most cars registered after April 2017 once they are in their second year of registration - has risen from £195 to £200. This applies across all fuel types, including electric vehicles. The increase is in line with Retail Price Index inflation and represents a relatively small change, though one that adds to a broader picture of rising running costs for motorists across the board. 

It is worth noting that the government has confirmed plans for a new pay-per-mile system for electric and plug-in hybrid vehicles, expected to come into force from April 2028. Under the proposed scheme, EV drivers would pay a per-mile charge on top of standard annual VED. While the detail of how mileage would be recorded is still to be confirmed, it is worth factoring this into any longer-term purchase decisions involving an electric vehicle. 

This article is for informational purposes only and reflects VED rates as of April 2026. Tax rules may change. We recommend confirming your specific vehicle's tax position by speaking with a Sales Executive at SERE Motors.