Experts have warned Chancellor Rachel Reeves that introducing new car taxes for hundreds of thousands of drivers could seriously impact a popular motoring sector.
The Chancellor will deliver the Government's Autumn Budget on Wednesday, November 26, with some fearing that changes to Vehicle Excise Duty could be on the table.
Ms Reeves, who represents Leeds West and Pudsey for Labour, has already overseen tax hikes, including the introduction of VED charges for electric car owners in April.
Shadow Transport Secretary Richard Holden suggested that Chancellor Rachel Reeves could target the classic car industry in a bid to raise money for the Government's coffers.
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Speaking to Classic Car Weekly, he described the potential cash grab against classic car owners as one of his "big concerns".
The Conservative MP for Basildon and Billericay noted that it was his "priority" to ensure the 40-year-old rule remains.
If a vehicle was first manufactured more than 40 years ago, owners are not required to pay tax, although they still need to register their vehicle.
Similarly, if it is unknown when the vehicle was built, but it was before January 8, 1985, it will also be exempt from paying Vehicle Excise Duty.
Chancellor Rachel Reeves could make a decision on classic car tax in the upcoming Budget
|GETTY/PA
In response to the concerns, one expert has warned that the Government could hammer the classic car industry if the VED exemption were to be scrapped.
Motoring barrister Richard Clegg pointed to DVLA figures to show how widespread a decision on the industry could be.
Data from the DVLA shows that there were 297,480 classic vehicles older than 40 years registered with the agency in 2023.
He suggested that the return for the Government would not be overly substantial. If all of these motorists were required to pay the top rate of £360, it would raise £107million.
Drivers are exempt from paying tax on classic cars if they are over 40 years old | CAR AND CLASSICLATEST DEVELOPMENTS:
Mr Clegg continued, saying: "The HMRC's own 2014 policy document, which justified the rolling 40-year VED exemption, mentioned that the historic car industry was worth £4billion and employed about 28,000 people in the UK.
"There are various later estimates, but the 2020 National Historic Vehicle Survey by the Federation of British Historic Vehicle Clubs estimated the historic sector (based on 30+ year-old vehicles and including SORN vehicles) as worth over £7.2billion a year and as employing over 34,000 people.
"Risking harm to that sector does seem like a big risk to take given the potential tax take."
The historic vehicle industry is estimated to be worth more than £7.2billion to the UK economy, in addition to supporting more than 100,000 jobs throughout the supply chain.
The annual turnover of the popular motoring sector is £18.3billion, according to figures from the Historic and Classic Vehicle Association (HCVA).
Labour has recently unveiled proposals to improve the sector in recent years, including the registration process to remove red tape for classic car owners.
In response to the calls for the removal of the VED exemption, a spokesperson for HM Treasury said: "The Chancellor makes tax policy decisions at fiscal events.
"We do not comment on speculation around future changes to tax policy," they told GB News.