Classic car owners under threat as Rachel Reeves may target tax loophole at Autumn Budget

Rachel Reeves could scrap a classic car tax loophole at the Autumn Budget in a blow to historic vehicle owners. Shadow transport secretary Richard Holden stressed he is "concerned" about the future of the 40-year tax exemption rule ahead of November’s statement.

He warned Labour could be eyeing up a “tax grab” on transport, with classic car owners possibly in the firing line. The rule means classic car owners no longer need to pay Vehicle Excise Duty (VED) fees on their models 40 years after it was first registered. The rolling 40-year tax exemption was never introduced by Labour, with David Cameron’s Conservatives bringing in the rule back in April 2014.

Speaking to Classic Car Weekly, Mr Holden said: “One of my big concerns is what’s going to happen with the 40-year-rule and things like that with the Budget coming up.

"And I think my priority at the moment is to make sure that we don’t end up seeing a tax grab on the sector at the Budget. That's my number one priority for the classic car sector because I think the danger is that they are looking right across transport."

At the time, the Conservatives explained they had introduced the rule to “support classic vehicles”. Cars built in 1985 are now exempt from the rule, with models first rolling off production lines in 1986 set to dodge VED fees from next year.

But, models will not be exempt from vehicle tax if cars are used for hire or reward or used commercially for a trade or business.

Despite the popularity of the scheme among historic vehicle owners, Rachel Reeves is under pressure to increase taxes at her Autumn Budget to fill a gap in public spending.

The National Institute of Economic and Social Research (NIESR), has recently estimated a “black hole” of around £50billion. Rachel Reeves has rejected the forecast, but has offered little in the way of detail around what fees could rise.

However, the Treasury has not been drawn into speculation, with road users having to wait a bit longer to find out what plans the Chancellor has up her sleeve.

A HM Treasury spokesperson said: “The Chancellor makes tax policy decisions at fiscal events. We do not comment on speculation around future changes to tax policy.”