Nearly half a million UK drivers are set to avoid paying the £425 annual luxury car tax following changes to the electric vehicle price threshold, new analysis from Dick Lovett shows.
Electric vehicles were previously exempt from the tax, but rules introduced from April 1, 2025 applied the £425 annual charge to EVs priced above £40,000.
The threshold has now been increased to £50,000, removing the charge for a significant number of vehicles.
Dick Lovett estimates that 475,836 vehicles registered since April 2025 now fall below the revised threshold, equating to a £425 annual saving per driver.
Over the five-year period in which the tax applies, this represents a saving of £2,125 per vehicle.
Across the UK, the total saving is calculated at more than £200 million.
The analysis covers 116 EV models across 23 ranges priced between £40,000 and £50,000. However, the group said eligibility varies by specification, with some trims within a model range still exceeding the threshold.
Widening choice in the mid-market EV segment
For example, the BYD Sealion 7 Comfort is now exempt with an on the road price of £46,990, while higher specification variants in the same range remain subject to the charge.
Some model ranges now fall entirely below the threshold at standard specification, including the BMW iX1 and iX2.
Other models now exempt include the Audi Q4 e-tron, Hyundai Ioniq 5 and Ioniq 6, Peugeot E-3008 and E-5008, Skoda Enyaq and Tesla Model Y, based on standard pricing.
Alex Lee, senior digital marketing executive at Dick Lovett, said the change would widen choice for buyers in the mid market EV segment.
He said: “For anyone looking at a new EV, this tax change offers a welcome savings opportunity.
“For those looking at electric cars between £40,000 and £50,000, drivers can now expect to save £2,125 over five years.”
Lee said the revised threshold allows buyers to consider higher specification versions of some models without triggering the additional tax.
He said: “This also means that drivers will have more choice when it comes to mid-range EVs, and can add higher spec trims to these models without worrying about extra taxes being applied.”
However, he cautioned that the tax remains dependent on list price at the point of purchase, and not all variants within a range will qualify.
Lee added: “However, with the changes in this tax, it’s important for drivers to look into the specific car they are wanting to get to avoid any confusion.
“While BMW’s iX1 and iX2 ranges now fall under the luxury car tax threshold, the iX M60 models will not be exempt from the £425 per year charge.
“The tax is based on the list price of your vehicle at purchase, so be sure you’re not opting for trims that push you over the threshold without knowing. It’s always best to head into a dealership to chat through your options if you’re not sure on pricing.”