UK Vehicle Excise Duty (VED), commonly called road tax, has a premium car supplement that adds £410/year for vehicles with a list price over £40,000. This supplement applies for years 2-6 of the vehicle's life (the first year uses a CO2-based first-year rate that is £0 for pure EVs). However, there is a crucial exemption: pure electric vehicles with a list price under £50,000 are exempt from the expensive car supplement entirely — saving £2,050 over 5 years.

VED Structure for Premium EVs in 2026-27

Pure EV under £40,000: Standard VED rate only (approximately £165/year). Years 1-5 total: £825. Pure EV £40,000-£50,000: Standard VED only, no supplement (because £50,000 is the EV threshold, not £40,000). Years 1-5 total: £825. Pure EV over £50,000: Standard VED + £410/year supplement for years 2-6. Years 1-5 total: £2,875.

Which Luxury EVs Are Exempt from the Supplement?

  • Tesla Model 3 Long Range (£48,000): Under £50,000 — exempt from supplement. VED = £165/year. 5-year total: £825.
  • BMW i5 (£55,000): Over £50,000 — pays supplement. VED = £165 + £410 = £575/year. 5-year total: £2,875.
  • Mercedes EQE (£65,000): Over £50,000 — pays supplement. VED = £165 + £410 = £575/year. 5-year total: £2,875.
  • Mercedes EQS (£95,000): Over £50,000 — pays supplement. VED = £0 first year + £575/year for 5 years = £2,875 total.

Savings by Choosing the Right EV

Choosing a £48,000 Tesla Model 3 over a £55,000 BMW i5 saves £2,050 in VED over 5 years. When combined with the 4% BIK rate for pure EVs (which applies regardless of price), the Model 3 is the most tax-efficient premium EV choice in the UK market for company car drivers.

Calculate VED costs for any UK vehicle at CarTax.online UK VED calculator.

What is the VED expensive car supplement?

The VED (Vehicle Excise Duty) Expensive Car Supplement adds £410/year to the standard rate for vehicles with a list price over £40,000. It applies for the first 5 years from the second year of registration. This is separate from the standard first-year rate based on CO2 emissions.

Which EVs are exempt from the expensive car supplement?

Electric vehicles with a list price under £50,000 are exempt from the expensive car supplement. EVs priced at £40,000-£50,000 pay the standard VED rate (£165/year) for years 1-5, then £0 from year 6. EVs priced above £50,000 pay standard rate + £410 supplement for years 2-6.

What does this mean for a £48,000 Tesla Model 3?

Tesla Model 3 Long Range at £48,000 is exempt from the expensive car supplement (under £50,000 threshold). VED = £165/year standard rate. Total 5-year VED = £825. Compare to BMW i5 at £55,000: £165 + £410 supplement = £575/year × 5 = £2,875 over 5 years. Tesla saves £2,050 in VED over 5 years.

What about EVs over £50,000 like Mercedes EQE?

Mercedes EQE at £65,000 pays the expensive car supplement. VED year 1: £0 (EV first-year rate). Years 2-6: £165 + £410 = £575/year. Total 5-year VED = £2,875. No exemption above £50,000.

How does this compare to petrol cars over £40,000?

A petrol BMW 3 Series at £45,000 pays: Year 1: Standard rate based on CO2 (approximately £200). Years 2-6: £165 + £410 = £575/year. Total 5-year VED = approximately £2,975. The £40,000 threshold is the same for petrol and EV — only EVs under £50,000 get the supplement exemption.

Official Resources: DVLA VED Rates | HMRC BIK Rates