Best premium cars that dodge the luxury car tax
These are the best cars that manage to avoid the UK government’s ‘Luxury Car Tax’
Most people would consider a ‘luxury car’ to be a high-end automobile such as a Mercedes S-Class or Range Rover. However, the UK government clearly disagrees, because it slaps a luxury-car tax (officially called the Expensive Car Supplement) on any combustion-engined car with a price tag north of £40,000.
That means every version of the long-serving and very popular BMW 3 Series attracts the tax, which is currently £440 per year on top of your standard road tax. Even electric cars are now subject to this additional charge, although it applies only to those that cost more than £50,000.
Either way, there are plenty of other premium cars, featuring good old combustion engines or new-fangled battery power, that manage to dodge the luxury car tax. These are the eight best on the market right now.
Audi Q3
- Pros: Classy interior with slick tech, handsome looks, well balanced driving experience
- Cons: Only one version costs less than £40k, engine could be more punchy, lots of piano black plastic
Winner of the 2026 Auto Express Small Premium SUV of the Year award, the new Audi Q3 offers impressive refinement, technology and quality, sophisticated looks and a roomy cabin, along with a strong selection of petrol, diesel and hybrid engines. But as well as meeting all the demands of a premium SUV buyer, because prices start from £38,165, it manages to sneak under the threshold for the luxury car tax.
Even though it’s only the entry-level Q3 in Technik specification that avoids the additional charge, this classy, well rounded SUV still feels suitably upmarket and comes loaded with kit.
Inside, you’ll find a sharp, very responsive 12.8-inch central touchscreen and an 11.9-inch driver’s display running Audi’s latest, customisable Android-based infotainment system that offers wireless Apple CarPlay and Android Auto connectivity. Meanwhile, the kit list includes heated front seats, ambient lighting, adaptive cruise control and driver monitoring.
It delivers a great all-round driving experience and a good balance between comfort and handling, ideal for the UK’s diverse roads. Plus the entry-level, well proven 1.5-litre TFSI petrol engine produces a hearty 148bhp, is very refined and can deliver up to 46.6mpg, according to Audi. When we put this to the test, across a combination of country roads, motorway and a little bit of town centre driving, we got 42.1mpg. All-in-all, an attractive package from the German powerhouse.
Mercedes CLA
- Pros: Choice of hybrid and EV power, very comfortable and refined, superb efficiency
- Cons: Some rivals are more spacious, styling not to everyone’s taste, limited rear visibility
The new Mercedes CLA is impressive for numerous reasons, particularly its top-notch interior quality, intuitive onboard tech, superb refinement, comfortable ride and remarkable real-world efficiency. On top of all that, both the hybrid and electric versions of this sleek saloon manage to avoid the luxury car tax.
Starting at £38,715, the entry-level hybrid CLA 180 Sport narrowly skirts under the threshold for combustion cars. It’s powered by a 134bhp 1.5-litre four-cylinder petrol engine plus a 30bhp e-motor that work together to deliver lots of zero-emissions driving, up to 56.5mpg, and superior flexibility to the EV version because it never has to be plugged in.
The pure-electric CLA isn’t at all short on range though, because it can cover up to 480 miles on a single charge; enough to get from Brighton to Edinburgh. Plus it can charge at up to 320kW, and prices start from £39,150, meaning you can splurge for a sporty-looking AMG Line version and still avoid a heftier tax bill.
Every model also features a panoramic glass roof, illuminated grille surround, 14-inch central touchscreen, a sharp driver’s display, 18-inch alloy wheels, adaptive cruise control and other driver-assistance tech including blindspot assist. By delivering all that as part of an exceptional, well-rounded package that avoids the punitive luxury car tax, the Mercedes CLA remains a brilliant choice.
MINI Countryman
- Pros: Interesting interior design, good tech and materials, petrol and electric available for less than £40k
- Cons: Doesn’t have the go-kart feeling of a MINI, occasionally hesitant automatic gearbox, firm ride at low speeds
The MINI Countryman does premium in a more fun and playful way, compared with the Mercedes CLA and other entrants on this list. Sure, you can have it with the traditional and predictable black leather (well, MINI’s vegan-friendly cowhide alternative), but it’s also available with petrol-blue seats and dashboard, plus there’s a knitted fabric covering most of the surfaces, which creates a more welcoming ambience.
The hi-res 9.4-inch circular OLED display offers retro-inspired graphics, a cute dog avatar for Spike, the virtual assistant, and if you flick the Countryman into Go-Kart mode, it makes a sound like you’ve just caught a star power-up on the Mario Kart game. Quality is good, of course, given MINI’s premium billing these days, and there’s plenty of space.
Prices for the not-so-mini family SUV start from much less than the £40,000 threshold for the luxury car tax, so you can get a mid-range Countryman 1.5 C Exclusive with the optional Level 2 pack – our recommended spec for this car – and still avoid the extra tax.
Mid-range Exclusive trim unlocks the more interesting paint and interior colour options, and adds some eye-catching gold trim. The Level 2 pack gets you plenty of extra luxuries, such as a head-up display, panoramic sunroof, Harman Kardon sound system, a more advanced driver-assistance set-up and extra flexibility from a sliding rear bench.
Mercedes GLB Electric
- Pros: Comfortable ride and plenty of oomph, cutting-edge technology, versatile seven-seater SUV
- Cons: Third row for kids only, lots of shiny plastics inside, limited boot space in seven-seat mode
It’s only thanks to the higher threshold to the luxury car tax for EVs that the new cutting-edge and versatile Mercedes GLB Electric is able to dodge it, because the premium SUV starts from £46,100. Nevertheless, customers will be pleased to learn that it does, and that even the base version offers all the tech you’ll probably ever need, seating for seven people and a 380-mile range.
Underneath is the same brand-new MMA architecture as in the CLA, with the GLB Electric featuring an 85kWh battery and a 320kW maximum charging speed, courtesy of an 800-volt electrical system. That means drivers can add more than 160 miles of range in just 10 minutes, if they use a suitably fast charger.
The ride is comfy and refinement overall is impressive, as is the interior quality and slick tech. There’s plenty of storage space for you and your passengers’ paraphernalia too, thanks to a 480-litre boot (with the rearmost seats down) and a 127-litre ‘frunk’ under the bonnet.
The GLB Electric 250+ Sport Executive comes in at just over £48,000, and for that you get a super-sharp 10.25-inch driver’s display plus a whopping 14-inch central touchscreen, a panoramic sunroof, wireless charging pads, keyless go and a host of driver-assistance features.
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Volkswagen T-Roc
- Pros: Much improved interior and tech, efficient petrol engines, handles well and is comfortable
- Cons: Occasionally jerky gearbox, slightly cramped back seats, black interior is a little drab
The previous Volkswagen T-Roc may have been very popular, but we weren’t particularly impressed by the interior quality of the Golf’s high-riding sibling, especially compared with other crossovers available for similar money. Thankfully, VW has clearly listened to the feedback from us and customers, because the all-new second-generation T-Roc feels like a major improvement in terms of the materials, finish and tech.
Gone are most of the hard, scratchy plastics, replaced by a technical knit on the dashboard and more soft-touch materials. Meanwhile, the steering wheel features proper physical buttons and there’s a large volume dial on the centre console, which can be programmed to also flick between drive modes or ambient lighting.
On the road, the T-Roc offers a mature and polished driving experience. Its mild-hybrid powertrains are refined and efficient, with the 148bhp 1.5-litre eTSI engine delivering seamless stop-start transitions and impressive real-world economy.
Crucially for those seeking upmarket quality without the premium price, the T-Roc starts from a little less than £32,000, and even the top-of-the-range R-Line model comfortably avoids the luxury car tax. Our pick of the bunch is the new extra-value £34,200 Match trim, which has the 148bhp engine and has most of the kit people will want.
Tesla Model 3
- Pros: Class-leading efficiency, incredibly quiet on the motorway, fit and finish are better now
- Cons: No indicator stalks, no Apple CarPlay, material quality could still be better
‘Premium’ might not be the first word that comes to mind when thinking about the Tesla Model 3, especially considering the build quality issues that this car suffered from when it was launched. But the pioneering EV has made some big steps forward in this department in the years since, particularly following its 2024 facelift.
Even if the materials still aren’t quite up to BMW or Mercedes standards, the Model 3’s interior feels very good, certainly more plush than it did originally, and features some exceptional tech by way of a super-slick infotainment system and 15.4-inch touchscreen.
The minimalist cabin might not be to everyone's taste, especially if you like having physical buttons, but it certainly provides a sense of airiness and there is plenty of space. Performance is impressive, of course, and it’s incredibly quiet when cruising on the motorway as you make the most of the huge range and Tesla’s Supercharger network.
Another beneficiary of EV’s £50,000 threshold for the luxury car tax, you don’t have to get the cheapest Model 3 to avoid it. The Premium Long Range Rear-Wheel Drive version is available from less than £45k, boasts a whopping 466-mile range, can do 0-60mph in less than five seconds and features lots of standard equipment.
Audi A3
- Pros: High-quality interior, strong selection of engines, slick and user-friendly infotainment
- Cons: S line trim has a firm ride, some options are expensive, physical climate controls now gone
The Audi A3 has long been the benchmark for the premium hatchback segment, and the latest iteration cements its status as a top-tier choice. Crucially, it manages to dodge the UK’s luxury car tax thanks to a competitive pricing strategy that keeps the majority of the range well below the £40,000 threshold for combustion-engined cars. Even the plug-in hybrid, by the skin of its mechanical teeth.
The A3 recently received an interior overhaul including a completely new dashboard, bigger screens and, somewhat disappointingly, the removal of its physical climate controls. The centrepiece is a curved panel on top of the dashboard that houses both the 12.8-inch touchscreen and an 11.9-inch ‘virtual cockpit’ driver’s display, running Audi’s latest infotainment tech. Plus, instead of having plastic cover the entire dashboard, the hatch is now offered with a variety of materials, including fabrics and carbon fibre for sportier models.
It’s available great range of efficient engines, with our pick of the bunch being the 148bhp four-cylinder petrol which benefits from mild-hybrid assistance to provide seamless stop-start and impressive real-world economy. The A3 feels sophisticated and comfortable on long journeys, but can certainly handle itself on a twistier road, too. For buyers seeking a stylish, practical and premium hatchback, the Audi remains an incredibly compelling proposition.
Volvo EX30
- Pros: Minimalist hi-tech interior, competitive entry price, packs plenty of punch
- Cons: Almost everything controlled by touchscreen, limited rear space, occasionally fiddly infotainment
It may be the smallest and least expensive car in Volvo’s line-up, but the EX30 proves that you don’t need a massive budget to enjoy a genuine premium car experience, and because of that it dodges the luxury car tax. Not just the entry-level ‘Core’ model either, which starts at £33,060. Every version of the small premium SUV escapes it, including the 428bhp dual-motor one, with the Scandinavian pocket rocket capable of 0-62mph in just 3.6 seconds.
As impressive as that might sound, we would stick with the mid-range P5 Long Range set-up that’s good for more than 300 miles on a single charge, provides punchy acceleration and you can get it with whatever trim level takes your fancy. Whether that’s ‘Ultra’ with all the bells and whistles Volvo can throw at the little EX30, or Cross Country that adds a bit of rugged charm.
Inside, the cabin is simple, solid and uncluttered, dominated by a 12.3-inch touchscreen with Google services built-in and nice-feeling materials. And of course, being a Volvo, safety is a big priority, so there’s no shortage of driver-assistance tech as standard.
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