Vehicle Excise Duty: update to 40 year rolling exemption for classic vehicles
Published 16 March 2016
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Who is likely to be affected
Owners of vehicles built more than 40 years ago.
General description of the measure
The measure extends the scope of the existing 40 year rolling Vehicle Excise Duty (VED) exemption for classic vehicles permanently so that on the 1 April each year vehicles constructed more than 40 years before the 1 January that year will automatically be exempt from paying VED.
Policy objective
The VED exemption is intended to support classic vehicles, which the government considers are an important part of the country’s historical and cultural heritage.
Background to the measure
Budget 2014 announced the introduction of a rolling 40 year exemption of VED for classic vehicles.
Detailed proposal
Operative date
The measure will have effect for eligible vehicles presented for exemption from 1 April 2017.
Current law
Section 1 and Schedule 1 of the Vehicle Excise and Registration Act (VERA) establishes VED in respect of mechanically propelled vehicles and sets out the rates of duty on vehicles. Schedule 2 of the Act provides a rates exemption in respect of vehicles constructed before 1 January 1976, provided that such vehicles are not used commercially.
Proposed revisions
The exemption cut-off date in Schedule 2 of the Act will be changed to 1 January each year to apply from 1 April of that year to take effect from 1 April 2017 as announced at Budget 2016. This will be legislated in Finance Act 2016.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| - | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure will have an advantageous impact for around 10,000 classic vehicle owners who will be included in the exemption each year. Most of these vehicles are assumed to be cars or vans and the annual savings will depend on the engine size of the vehicle. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be any significant impacts on groups with protected characteristics as a result of these changes.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on business and civil society organisations. Classic vehicle motor traders and dealers who trade and sell cars may see an increase in sales as a result of the extension to the exemption.
Operational impact (£m) (HMRC or other)
This measure will have a negligible impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA).
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be evaluated and monitored through the DVLA vehicle licensing data.
Further advice
If you have any questions about this change, please contact the DVLA on Telephone: 0300 790 6802 or at Contact DVLA