The Government has confirmed it is reviewing vehicle excise duty arrangements as part of broader tax reforms, with recent changes already impacting owners of classic and heritage vehicles.
Classic Car Tax Exemption Under Scrutiny
Treasury minister Dan Tomlinson responded to a written parliamentary question from Liberal Democrat MP Ben Maguire regarding potential changes to car tax exemptions for classic vehicles. Currently, cars manufactured or registered over 40 years ago are typically exempt from vehicle excise duty, but this longstanding benefit is now being examined.
Changes implemented since April 2025 mean vehicles registered between 1985 and 2001 now face car tax charges, marking a significant shift in how older vehicles are treated within the tax system.
Government Stance on Tax Review
In his official response, Mr Tomlinson stated: "The Government annually reviews the rates and thresholds of taxes and reliefs to ensure that they are appropriate and reflect the current state of the economy. The Chancellor makes decisions on tax policy at fiscal events in the context of the public finances."
This confirmation comes amid broader concerns about how the Treasury will maintain revenue streams as more drivers transition to electric vehicles, which don't currently pay fuel duty.
DVLA Enforcement and Penalties
The Driver and Vehicle Licensing Agency recently reinforced its warning to motorists about the importance of vehicle taxation. All vehicles must be registered for car tax, even if no payment is required, according to official guidelines.
Motorists can settle their car tax through either a single annual payment or monthly instalments. Failure to comply with taxation requirements carries serious consequences:
- Substantial fines for untaxed vehicles
- Clamping of vehicles found untaxed on public roads
- Potential impoundment for persistent offenders
The DVLA emphasised this message through social media, directing vehicle owners to the official GOV.UK website for taxation services.
Electric Vehicle Tax Changes Looming
Separate reports indicate that Chancellor Rachel Reeves will unveil a new policy introducing a 3p per mile tax for electric vehicles when she delivers her November 26 Budget. This move has raised concerns among motoring groups who fear it could discourage the transition to electric motoring.
The Treasury faces a significant challenge as fuel duty revenue, which raised nearly £25 billion in the 2024/25 financial year, declines with the shift away from petrol and diesel vehicles.
A Government spokesperson acknowledged the need for a balanced approach: "Fuel duty covers petrol and diesel, but there's no equivalent for electric vehicles. We want a fairer system for all drivers whilst backing the transition to electric vehicles."
AA president Edmund King urged caution, stating that while understanding the Treasury's revenue concerns, the Government should "tread carefully" to avoid slowing the transition to cleaner vehicles. He emphasised the need to examine whether proposed new taxes would be equitable or essentially represent "a poll tax on wheels."
The Government has invested £4 billion in supporting electric vehicle adoption, including grants reducing upfront costs by up to £3,750 per eligible vehicle, while simultaneously developing new taxation frameworks to ensure all road users contribute fairly to maintaining infrastructure and public services.
