What is the £40,000 car tax rule?

The £40,000 rule refers to an additional road tax surcharge — often called the "expensive car supplement" — that applies to vehicles with a list price over £40,000 when new.

How it works:

• It applies based on the car's original list price, not what you paid for it — so a used car bought for under £40,000 can still be subject to the surcharge if it originally listed above that threshold
• The supplement is paid on top of the standard annual rate, typically for five years, starting from the second year of registration
• It applies regardless of fuel type, though the rules around electric vehicles and this supplement have shifted over time, so it's worth checking current thresholds for the specific registration year

This rule catches out a lot of used car buyers, since a three-year-old premium car might look like a bargain on price alone, but still carry several hundred extra pounds a year in tax versus a similarly priced car that never crossed the £40,000 threshold when new. Checking a car's original list price (not just its current asking price) is the only reliable way to know if this surcharge applies.