Rachel Reeves's car tax changes have dragged hundreds of thousands more drivers into a so-called "luxury" levy, with critics warning ordinary families are now being hit by a stealth tax.
More than 426,000 motorists were forced to pay the Expensive Car Supplement in the 2024–25 financial year, a sharp 42 per cent rise compared with just two years ago.
Figures from the DVLA, obtained through a Freedom of Information request, showed 426,758 drivers paid the tax, up from 299,553 in 2022–23.
The increase comes as the £40,000 car tax threshold has remained frozen since 2017, despite years of inflation pushing up vehicle prices. What was once aimed at premium cars is now catching increasingly common family vehicles.
TRENDING
Stories
Videos
Your Say
The levy, otherwise known as the luxury car tax, applies to any vehicle that costs more than £40,000 when new. Drivers must pay an extra £425 a year from the second to the sixth year of ownership, adding up to £2,125.
Crucially, the threshold has not risen in eight years. Had it kept pace with inflation, it would now sit at nearly £54,000. As a result, cars that many motorists would not consider "luxury" are now being taxed as such.
Popular models, including the Volkswagen Golf Match, Peugeot 5008, and higher-spec versions of the Kia Sportage, are now caught by the charge.
Hybrid vehicles have been hit particularly hard. The number of hybrids liable for the tax has more than doubled, rising from 116,000 in 2022–23 to 248,000 in 2024–25.
Rachel Reeves introduced a number of new car tax measures in the Autumn Budget
| PA/GETTYElectric vehicles were previously exempt, but were brought into the tax from April this year. In just five months, by September, around 119,000 EV buyers were affected.
In last month's Budget, Ms Reeves announced changes that will raise the threshold to £50,000, but only for electric vehicles, starting next April.
Petrol, diesel and hybrid cars will remain subject to the existing £40,000 limit, creating what critics describe as a two-tier car tax system.
The Treasury estimated the higher EV threshold will cost £1.2billion in lost revenue over five years. Ministers argued the move will help boost electric vehicle uptake and could save more than a million drivers up to £440 a year.
LATEST DEVELOPMENTS
Rachel Reeves delivered the Budget in the Commons on November 26 | PAThe change forms part of wider EV support, including funding for charging infrastructure and the Electric Car Grant. However, motoring groups have strongly criticised the levy itself. Brian Macdowell, from the Alliance of British Drivers, said the tax was wrong from the start.
"It should never have been brought in in the first place. It's nothing more than the politics of envy," he said.
"For a Government to continue to put a stealth tax on buying a vehicle is nothing but an attempt to raise revenue by the back door. Taxing so-called luxury vehicles is a backward move."
Car dealers also warned that the frozen threshold has completely undermined the tax's original purpose.
The Government will introduce a new Expensive Car Supplement rate next year for electric cars
| X/DVLABen Welham, from Marshall Motor Group, said: "These are vehicles that many drivers wouldn't consider expensive by today's standards. Many of these are modern, practical family cars caught in a tax bracket intended for cars with a more premium feel."
But the Treasury has defended the levy, arguing that owners of more expensive cars should contribute more to public services and road improvements.
A Government spokesman said two-thirds of new petrol, diesel and hybrid cars still fall below the threshold. The spokesperson added that the Government is "backing drivers by freezing fuel duty" alongside the EV tax change.
Mr Macdowell called this system "outrageous", saying there is "no justification" for passing the tax burden on to another driver.
Our Standards: The GB News Editorial Charter