Chancellor Rachel Reeves is reportedly considering ending the long-standing road tax exemption for classic cars, in what critics are calling another “tax grab” on drivers.
The 40-year Vehicle Excise Duty (VED) exemption - introduced by George Osborne in 2015 - currently spares cars over four decades old from paying road tax. The rule applies on a rolling basis each year, so as of April 2025, vehicles registered before 1 April 1985 are exempt.
If Reeves removes the exemption in her upcoming Budget on 26 November, roughly 340,000 owners of older cars could face new annual tax bills. Treasury estimates suggest this could raise around £107 million per year.
Shadow Transport Secretary Richard Holden has warned that scrapping the exemption would be “a tax grab on a cherished part of British motoring culture,” and says protecting the classic car sector has become his “number one priority.”
Classic car owners currently enjoy not only VED exemption but also freedom from MOT testing for vehicles over 40 years old — a change introduced in 2018. This was justified on the basis that classic car enthusiasts invest heavily in maintaining their vehicles, which tend to be simpler and better cared-for than modern cars.
The Labour Party has previously scrapped vintage vehicle exemptions. In 1997, then-Chancellor Gordon Brown ended road tax relief for cars built after 1 January 1973. The rolling 40-year rule was later reinstated by the Conservatives in 2015.
If Reeves proceeds, owners of iconic models such as Minis, MGBs, and other pre-1985 British classics could all face annual VED bills. Depending on engine size, these charges would range from £220 to £360 per year.
Industry figures warn the move would hit an important heritage sector. Mark Roper, managing director of Hagerty UK, described the proposal as “a blow” to an industry that contributes nearly £3 billion in taxes annually.
“Classic cars are often seen as polluting, but in reality they’re used sparingly and run on cleaner modern fuels,” he said. “Removing the exemption would unfairly penalise enthusiasts who preserve Britain’s automotive history.”
He added that Hagerty and other organisations, such as the Historic & Classic Vehicle Alliance (HCVA), are urging the government to reconsider.
A Treasury spokesperson declined to comment on the reports, saying only:
“The Chancellor makes tax policy decisions at fiscal events. We do not comment on speculation around future tax changes.”
