The Government has no plans to reduce the tax exemption age for classic cars from 40 to 20 years. While the Government keeps all taxes under review, we consider 40 years a fair cut-off date.
The Government considers that classic vehicles are an important part of the country’s historical and cultural heritage. According to research by the Federation of British Historic Vehicle Clubs, in their publication of the 2020 National Historic Vehicle Survey, the historic car industry employs around 34,000 people in the UK.
Recognising the important role played by historic vehicles, at Budget 2014 the Government announced that it would introduce a rolling 40-year Vehicle Excise Duty (VED) exemption for classic cars. This means that currently vehicles constructed before 1 March 1984 are exempt from paying VED. The law does not specifically define a vehicle as historic or classic for registration purposes, and it is widely recognised that there are many factors other than age which influence whether a car is considered as classic. The Government has therefore set 40 years as being a fair cut-off date to distinguish classic cars from older cars.
At the end of 2023, the Drivers and Vehicle Licensing Authority reported that a total of 338,697 classic cars had registered keepers, of which 12 percent had a Statutory Off Road Notification (SORN) in place. Reducing the threshold from 40 to 20 years would result in significantly more vehicles being categorised as classic cars, and therefore benefiting from the exemption from VED, with a corresponding revenue impact.
The petition also referred to the costs of annual VED for a vehicle that is infrequently used. The current VED system is a tax on vehicle ownership rather than mileage, with rates based on factors including the vehicle type, engine size, date of first registration and carbon dioxide (CO2) emissions. However, motorists additionally pay fuel duty on the petrol or diesel which they purchase, so those who complete significant mileage in cars that run on petrol or diesel will generally pay more in fuel duty than those who drive fewer miles.
Revenue from motoring taxes helps ensure we can continue to fund the vital public services and infrastructure that people and families across the UK expect, however the Government also recognises that transport is a major cost for households and businesses. That is why at Spring Budget 2024 the Government also announced maintenance of fuel duty at its current rate for an additional 12 months by extending the temporary 5p fuel duty cut and cancelling the planned inflation increase for 2024-25. That represents a saving for drivers this year of overall around £3.1 billion and for the average car driver around £50.
While there are no current plans to reduce the tax exemption age for classic cars from 40 to 20 years, the Government keeps all taxes under review, and welcomes representations from the public on improvements to the tax system.
HM Treasury
