'Envy' tax to clobber one million drivers who buy an average car this year

By LIZ HULL, NORTHERN CORRESPONDENT Published: 01:13, 20 July 2026 | Updated: 01:26, 20 July 2026 Almost a million drivers will be hit by a 'luxury' vehicle tax this year after a new car's average price topped £40,000. The 'expensive vehicle supplement' is an annual £425 levy paid for five years on a car costing more than £40,000. But with everyday vehicles such as a Volkswagen Golf, Ford Kuga and Skoda Kodiaq now priced at that much, thousands more families are sucked into paying the 'envy' tax. Ian Taylor, of the Alliance of British Drivers, said: 'Ordinary families are being priced out. For most people the car is an essential thing more than it is a luxury. The Government needs to rethink this tax.' The levy is paid for five consecutive years after the second year of registration, costing buyers £2,125. About 926,000 new cars costing above £40,000 were registered last year, data from automotive analysis firm Jato shows. That figure is set to rise again in 2026, it says, with sales from the first six months suggesting registrations could top 973,000 by the end of the year. The Government raised the tax threshold for electric cars to £50,000 in April to reflect their higher price, but the threshold for petrol and diesel cars has been frozen since 2017 when the average cost was £26,000. Sue Robinson, of the National Franchised Dealers Association, said: 'Everyday family cars are increasingly being classed as luxury vehicles rather than the exception the tax was designed to capture.' The envy tax is an annual £425 levy paid for five years on a car costing more than £40,000. Everyday vehicles such as a Volkswagen Golf M may be affected by the tax The luxury tax, which also applies to hybrid cars, is based on the manufacturer's price listing, meaning any dealer discounts at the point of sale are ignored even if the final purchase price drops below £40,000. The levy must also be paid on second-hand cars if bought within the applied period. Engineer Jeremy Stern, 50, of Southam, Warwickshire, paid £48,000 for a second-hand Tesla saloon in 2024, less than half the £98,000 it cost new. He told the Sunday Times: 'Freezing thresholds on car tax is a stealthy way of making more people pay. It seems like another envy tax.' The Society of Motor Manufacturers and Traders said 70 per cent of new cars now cost £40,000 or more. Since 2017, the price of a VW Golf GTI has risen from £27,865 to £44,175. The price of a Vauxhall Grandland Ultimate, a family SUV, has increased from £33,995 to £40,745. The ST Line of the Ford Kuga, another SUV, cost £25,845 in 2017, compared to £40,485 today. Jato said buyers are turning to cheaper Chinese brands, such as Jaecoo, BYD and Chery. Over the past year, sales of Jaecoo vehicles, which cost £32,000 on average, increased from 8,399 to 34,084. A Treasury spokesman said revenue from motoring taxes helped to 'fund the public services and infrastructure we all rely on'. He added: 'The expensive car supplement ensures those buying the most expensive vehicles make a fair contribution. We have raised the threshold for new electric cars to £50,000 and are protecting motorists by extending the 5p cut to fuel duty.'