The British Government is considering changes to the controversial ‘Tesla Tax’ on newly purchased EVs, according to a leaked letter obtained on Friday by local media outlets.
Introduced in 2017, the Expensive Car Supplement (ECS) — publicly recognized as the ‘Tesla Tax’ — is an additional duty imposed on top of the standard Vehicle Excise Duty (VED), which applies from the second year of ownership.
Any vehicle priced above £40,000 ($53,700) is subject to the ECS. The tax applies for a five-year period, in addition to the standard £195 ($260) VED. This brings the total annual charge to £620 ($830) — or £3,100 ($4,200) over the full term.
The tax has been applied to new petrol and diesel vehicles since 2017. To align tax policy with environmental goals, the ECS was extended to EVs purchased from April 1.
The decision has faced backlash from industry leaders, who argue that the ECS on EVs is counterproductive, with critics claiming it has contributed to weakening demand.
The £40,000 mark has remained static for the past eight years.
In a letter addressed to Liberal Democrat MP Ben Maguire, Minister Lilian Greenwood said that the Government is reconsidering the approach, acknowledging that the ECS applied to EVs may be “disproportionate.”
U.K.’s Minister for the Future of Roads stated that “the Government recognises the disproportionate impact of the current VED Expensive Car Supplement threshold for those purchasing zero emission cars from 1 April 2025.”
Greenwood wrote that the executive will “consider raising the threshold for zero emission cars only at a future fiscal event to make it easier to buy electric cars.”
The ECS disrupted manufacturers’ pricing strategies and added further challenges to an already fragile EV market.
Several automakers reduced the prices of select EV models to fall just below the £40,000 threshold.
The entry-level trim of the refreshed Tesla Model Y is priced from £44,990 while the long-range rear wheel drive and the long-range all wheel drive start from £48,990 and £51,990, respectively.
