Chancellor of the Exchequer, Rachel Reeves, confirms classic cars over 40 years old to remain exempt from Vehicle Excise Duty
Decision is welcomed by Hagerty and owners of the 1.9 million classic cars on UK roads, over 350,000 of which are eligible for exemption
Historic and Classic Vehicles Alliance reports UK Classic car industry worth over £7.3 billion and contributes £3 billion in direct taxes annually
The UK Chancellor, Rachel Reeves has finally ended the uncertainty around classic car taxation after months of speculation. The 2025 Autumn Budget has confirmed that classic cars over 40 years old will continue to be exempt from Vehicle Excise Duty (VED), a decision welcomed by owners and industry alike.
“Along with the announcement that a freeze on fuel duty will continue, this is very welcome news for classic car owners and for an industry that contributes over £3 billion in direct taxes to the UK economy every year,” says Mark Roper. Managing Director of classic car insurance specialist, Hagerty UK. “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.”
Currently there are 1.9 million classic cars and motorcycles in the UK, over 350,000 of which are more than 40 years old and eligible for VED exemption. Typically, a car can be considered a classic when it is 25 years old or more, including models from the 80s, 90s and even the noughties, far more modern than many might think
“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,” says Dale Keller, CEO of the Historic & Classic Vehicles Alliance (HCVA). “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.”
Maintaining the 40-year VED exemption, Chancellor Reeves will ensure that the heritage vehicle industry continues to thrive and contribute to the UK’s economy and cultural fabric.
There was further welcome news in the Autumn Budget when Reeves confirmed that classic cars will continue to be exempt from the annual MOT vehicle test, but the Chancellor stressed that this would remain under review for the next few years.
But not all are in favour of the lack of MOT, warns Roper: “Many organisations would like to see an annual roadworthy test for older vehicles, and many classic vehicle owners choose to continue with a yearly MOT test despite exemption, as being assured of their continued roadworthiness is something to be welcomed.“
Hagerty is a specialist insurer which continually seeks to evolve the UK classic car enthusiast sector with new initiatives. Over the past few years these have included its sociable Bicester Heritage Clubhouse, unique motoring events such as RADwood and the Festival of the Unexceptional and its famous Hagerty Drivers Club.
The Historic And Classic Vehicles Alliance was launched in May 2021 with a mission to protect and promote the sector and secure its long-term future. It campaigns on behalf of individuals and companies in the classic vehicle world, including specialist restorers, dealers, parts suppliers and a broad cross-section of the multi-billion-pound industry.
