After months of uncertainty and speculation, the Chancellor has finally confirmed that classic cars over 40 years old will continue to be exempt from Vehicle Excise Duty (VED).
The announcement, made as part of the 2025 Autumn Budget, has been warmly welcomed across the historic and classic vehicle sector, an industry that contributes more than £7.3 billion to the UK economy and supports over 100,000 jobs.
For an automotive aftermarket still grappling with mixed messages on electrification and pay-per-mile taxation, this is one of the few areas where clarity has finally been delivered.
Mark Roper, managing director of classic car insurance specialist Hagerty UK, described the decision as “very welcome news,” particularly alongside the continued freeze on fuel duty. He notes that classic cars often face unfair scrutiny in the age of electrification, despite their environmental footprint being significantly lower than many assume.
“These vehicles represent the ultimate in recycled and sustainable motoring,” said Mark. “The industry contributes over £3 billion in direct taxes every year, and classic cars form an important part of our cultural and economic landscape.”
Why it Matters
The confirmed 40-year VED exemption gives garages confidence to plan heritage services without fear of sudden rule changes.
Classic vehicles often require specialist skills, bringing in loyal customers and higher-value jobs for independent workshops.
The £7.3bn classic car sector relies on independent restorers, technicians, and parts suppliers, supporting jobs and local economies.
With mixed signals elsewhere in the Budget, this is one area where garages finally get clarity.
The UK currently has 1.9 million classic cars and motorcycles on the road.
Of these, more than 350,000 qualify for VED exemption through the 40-year rolling rule.
And while many drivers picture classics as pre-war icons or 1960s sports cars, the reality is different: models from the 1980s, 1990s and even early 2000s now fall under the “classic” banner.
According to Dale Keller, CEO of the Historic & Classic Vehicles Alliance (HCVA), maintaining the exemption aligns with the Government’s wider environmental goals.
Classic vehicles’ lifecycle carbon impact is negligible compared to the manufacture of new cars, and they are typically used sparingly as “cherished items of industrial and design heritage.”
The VED exemption was originally introduced because applying the tax to such infrequently used vehicles was seen as disproportionate—an argument the government appears to have upheld.
The Autumn Budget also confirmed that classic cars will remain exempt from annual MOT tests, a continuation of existing policy, but one the Chancellor said will remain under review.
Not everyone is comfortable with MOT exemption. Roper notes that many organisations still argue for an annual roadworthiness check, and many classic owners voluntarily submit their vehicles for testing for peace of mind.
While debate continues over MOT policy, the broader response to today’s announcements is overwhelmingly positive.
For industry specialists, the confirmation brings stability to a sector that relies heavily on clear long-term policy.
For now, at least, the government has sent a signal that the UK’s classic vehicle heritage is worth protecting.
