'Envy' tax to clobber 1million drivers who buy an average car this year

Almost a million drivers in the UK will face a new financial burden this year due to a 'luxury' vehicle tax introduced by the government. The tax, known as the 'envy' tax, targets vehicles priced over £40,000, imposing an annual £425 levy that must be paid for five consecutive years following the second year of registration. This means drivers could end up paying nearly £2,125 over the course of the tax period. The tax has come under fire from industry representatives and consumer groups, who argue that ordinary families are being unfairly impacted. Vehicles such as the Volkswagen Golf, Ford Kuga, and Skoda Kodiaq, once considered affordable, are now routinely priced above the £40,000 threshold, leading to widespread concern among drivers. Ian Taylor of the Alliance of British Drivers stated that the policy is pricing many families out of the market, emphasizing that for most people, a car is an essential necessity rather than a luxury. According to data from automotive analysis firm Jato, approximately 926,000 new cars priced above £40,000 were registered in the previous year. Sales figures from the first six months of 2026 suggest that number could climb to around 973,000 by year-end. This increase reflects broader trends in the automotive sector, including rising prices for both traditional and electric vehicles. The government had previously raised the tax threshold for electric cars to £50,000 in April, citing their higher manufacturing costs. However, the threshold for petrol and diesel vehicles has remained unchanged since 2017, when the average cost of a new car was £26,000. Sue Robinson of the National Franchised Dealers Association criticized the policy, noting that everyday family cars are increasingly being classified as luxury vehicles. She pointed out that the tax is based solely on the manufacturer’s listed price, ignoring any dealer discounts that might bring the final purchase price below £40,000. This approach has led to frustration among consumers, particularly those purchasing used vehicles. Jeremy Stern, a 50-year-old engineer from Southam, Warwickshire, recently paid £48,000 for a second-hand Tesla saloon, significantly less than its original price of £98,000. He described the situation as a “stealthy” method of increasing the tax burden on more people. The Society of Motor Manufacturers and Traders reported that 70% of new cars now exceed the £40,000 mark. This trend is evident in models such as the Volkswagen Golf GTI, which saw its price rise from £27,865 in 2017 to £44,175 today. Similarly, the Vauxhall Grandland Ultimate, a family-oriented SUV, has climbed from £33,995 to £40,745 over the same period. The Ford Kuga ST Line, another popular model, has also experienced a substantial increase, going from £25,845 to £40,485. In response to growing concerns, some drivers are turning to cheaper alternatives, particularly Chinese brands such as Jaecoo, BYD, and Chery. These vehicles, averaging around £32,000, have seen a surge in popularity. Sales of Jaecoo models, for instance, rose dramatically from 8,399 units in the previous year to 34,084 in the current one. A Treasury spokesperson defended the policy, stating that revenue from motoring taxes helps fund public services and infrastructure. They emphasized that the expensive car supplement ensures those purchasing high-cost vehicles contribute fairly, while also highlighting efforts to protect motorists through measures such as extending the 5p cut to fuel duty.