Luxury car tax UK — high-value vehicles face an additional road tax burden through the premium rate. Here is what luxury car owners pay in 2026.
The Premium Rate: £40,000 Threshold
Vehicles with a list price of £40,000 or more pay an additional premium rate of £355/year from years 2-6 of their life. This is added on top of the standard annual rate. For most luxury vehicles, this makes the total annual road tax £365/year from years 2-6 — nearly double the £190/year standard rate.
Luxury Car VED Examples
- BMW 7 Series (petrol, 228g/km, £75,000): £1,565 first year, then £365/year (premium + £190 standard)
- Mercedes S-Class (diesel, 189g/km, £90,000): £1,100 first year, then £365/year
- Range Rover Autobiography (diesel, 218g/km, £115,000): £1,565 first year, then £365/year
- Bentley Continental GT (petrol, 278g/km, £180,000): £2,605 first year, then £365/year
Luxury Electric Vehicles: The Premium Rate Catch
The premium rate catches many luxury EV buyers unexpectedly. A £50,000 Tesla Model S pays £0 first-year VED (all EVs do) but then pays £365/year from years 2-6 — £175/year more than a standard petrol car. The EV road tax advantage is significantly reduced for vehicles over £40,000.
When Does the Premium Rate End?
From year 7 onwards, all vehicles — including those over £40,000 — pay the standard annual rate of £190/year. The premium rate applies only in years 2-6 of the vehicle's life.
Is the Premium Rate Fair?
The premium rate was introduced in 2017 to ensure high-value vehicle owners contributed more to road costs. Critics argue it unfairly penalises luxury EV buyers who are already making an environmentally positive choice. Defenders note that high-value vehicles cause more road wear and should contribute more.
Conclusion
Luxury car tax UK: £40,000+ vehicles pay £365/year from years 2-6. EVs over £40K lose much of their road tax advantage. Calculate your luxury car tax before buying.