Classic car drivers can breathe a sigh of relief after escaping Chancellor Rachel Reeves’ budget relatively unscathed. The 2025 Autumn Budget has confirmed that classic cars over 40 years old will continue to be exempt from Vehicle Excise Duty (VED), a decision welcomed by owners and industry alike.
A five pence per litre cut in petrol and diesel duty has also been extended until September 2026 so filling up your classic won’t cost any more until then (in tax at least). After that the planned inflation increase has been scrapped for 2026-27, but beyond this time fuel duty will “gradually return to 2022 levels” pushing prices up.
There’s more good news for those seeking to keep down the costs of driving as, from early 2026, all petrol stations will need to report their prices to the Government’s Fuel Finder which means motorists can easily find the cheapest fuel nearby.
RAC head of policy Simon Williams has welcomed the news. “Drivers will be relieved the Chancellor has decided to keep the 5p duty cut in place for now as it saves them more than £3 a tank,” he said. “But this relief will be very short-lived given the staggered increase from next September. Without the discount, drivers would still be paying more for a litre of petrol than they were prior to Russia’s invasion of Ukraine in February 2022 which sent pump prices rocketing to record levels. The introduction of the long-awaited Fuel Finder in early 2026 will also be a big moment – for the first time, all petrol stations will need to report their prices allowing customers to find the cheapest fuel wherever they are.”
EV drivers, meanwhile, are being hit hard by the Chancellor, having previously enjoyed a run of benefits to encourage them to swap from internal combustion. From April 2028 electric car owners will face a charge of 3p per mile drive, with plug-in hybrid owners paying 1.5p per mile. That’s on top of the new standard EV road tax rate of £195. The Government claims that this new tax still makes EVs more cost-friendly as the tax is “half the fuel duty rate paid by drivers of petrol cars.”
Anyone who has paid the high prices of roadside rapid charging will be dismayed that the Government hasn’t cut the cost of VAT on public charging to offset some of this cost. The Office for Budget Responsibility (OBR) actually expects the rate of EV adoption to drop as a result of this new charge, and is extending the Electric Car Grant scheme until March 2030, at an estimate cost of £1.3 billion, to try to encourage drivers to make the switch to electric. Buyers of premium EVs will benefit from an increase in the threshold for the VED (road tax) Expensive Vehicle Supplement from £40,000 to £50,000 in April 2026.
Beyond these measures the Government is expecting car makers to take a hit. “This new charge is likely to reduce demand for electric cars as it increases their lifetime cost,” says the OBR. “To meet the mandate, manufacturers would therefore need to respond through lowering prices or reducing sales of non-EV vehicles.”
“Along with the announcement that a freeze on fuel duty will continue, the news that that classic cars over 40 years old will continue to be exempt from VED is very welcome news for owners and for an industry that contributes over £3 billion in direct taxes to the UK economy every year,” says Mark Roper, Managing Director of Hagerty UK. “The introduction of pay-per-mile charging for Electric Vehicles and Plug-in Hybrid Electric Vehicles from 2028 was widely anticipated as the government looks to recoup lost fuel duties, but in an age of electrification, classic cars are often looked at unfairly. However, these vehicles represent the ultimate in recycled and sustainable motoring and that’s before you consider the UK classic car industry is worth £7.3 billion, contributes £3 billion annually to the economy, and has over 100,000 jobs dependent on the sector.”
