Rachel Reeves has announced a hike in the threshold of the Expensive Car Supplement to support the uptake of electric vehicles.
In documents leaked prior to the Chancellor's Budget announcement, the Office for Budget Responsibility stated that changes would be made to the Expensive Car Supplement.
It states that the threshold of the ECS will be hiked from £40,000 to £50,000 in April 2026 at a cost of £500million in 2030-2031.
This charge is levied on motorists for five years once the vehicle is first registered, totalling £2,370 for a car purchased in 2025-2026.
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This takes into account a hike to the rate of the Expensive Car Supplement at an average cost of £474 a year for five years.
This is higher than the current rate of £425 for all vehicles which cost more than £40,000.
Experts have consistently called for this change to be introduced to help motorists adopt electric vehicles and ditch petrol and diesel cars.
While electric vehicle prices are falling, they are oftentimes still more expensive than petrol and diesel counterparts.
The new changes will help drivers avoid extra costs when buying a new zero emission vehicle, especially if it costs just over £40,000.
Jon Lawes, Managing Director at Novuna Vehicle Solutions, one of the UK's largest fleet operators, said: "EVs have only recently lost their VED exemption, and while upping the threshold to £50,000 for the Expensive Car Supplement is welcome, the confirmation of the pay-per-mile charge effectively turns this into VED-plus.
"The new subsidies are welcome, but set against these tax changes, it still feels like one step forward and two steps back."
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The Expensive Car Supplement applies to all vehicles with a list price of more than £40,000 | PABudget documents state the change to the Expensive Car Supplement to £50,000 is for zero emission vehicles only.
It adds that the change will take effect from April 1, 2026, and will apply zero emission vehicles registered from April 1, 2025.
Similarly, Matt Galvin, managing director of Polestar UK, said the brand was "pleased to see progress" on raising the Expensive Car Supplement.
Polestar's UK boss said the raising of the ECS threshold was a positive move
| POLESTARHe continued, saying: "Support for private retail customers is essential to drive EV adoption.
"While it's positive to hear another £200million will be invested in charging infrastructure, we now need to see that funding translated into rapid delivery on the ground; more reliable charge points, more coverage across the UK and a network that gives everyday drivers the confidence to make the switch."