Rachel Reeves is not expected to change classic car tax exemption rules despite speculation that the discount could be axed. Ahead of the Budget, Conservative MP Richard Holden admitted he was "concerned" the 40-year historic tax exemption rule could be ditched.
However, experts at the Historic & Classic Vehicles Alliance (HCVA) and Hagerty UK understand that the rule won't change. It means historic models first registered over 40 years ago will continue not paying Vehicle Excise Duty (VED) in a massive boost to thousands of road users. Dale Keller, CEO of the Historic & Classic Vehicles Alliance (HCVA) welcomed the move, stressing that any increase in VED fees would be “disproportionate".
Dale said: “Preserving the exemption aligns with the government’s wider environmental goals through maintaining vehicles whose lifecycle carbon impact is negligible compared to the manufacture of new vehicles.
“Research suggests classic vehicles are used sparingly as cherished items of industrial and design heritage. The tax contribution of the vehicles was made decades ago and applying the VED would be disproportionate to their use, which was the key factor in the exemption being applied in the first place.”
Under the current system, vehicles are fully exempt from VED fees once a car hits 40 years old as part of a rolling exemption. It means that from 2025, models first registered in 1985 no longer need to pay charges, with cars first hitting the roads in 1986 set to enjoy the benefit from next year.
It is estimated that there are 1.9 million classic cars and motorcycles in the UK, with over 350,000 of these being more than 40 years old and therefore eligible for tax exemption.
Mark Roper, Managing Director of classic car insurance specialist, Hagerty UK, stressed there was concern that classic cars would be "unfairly" treated.
Mark explained: “The introduction of pay-per-mile charging for Electric Vehicles and Plug-in Hybrid Electric Vehicles from 2028 was widely anticipated as the Government looks to recoup lost fuel duties, but in an age of electrification, classic cars are often looked at unfairly.
“However, these vehicles represent the ultimate in recycled and sustainable motoring and that’s before you consider the UK classic car industry is worth £7.3 billion, contributes £3 billion annually to the economy, and has over 100,000 jobs dependent on the sector.”