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There are many benefits to be had from running a classic car besides being both fun and a useful investment. Classics can be surprisingly economical, as some essential items like insurance can often attract lower premiums with road tax and MOT even non-existent in some cases!​ Read this guide to classic car road tax and get informed.

Road tax or Vehicle Excise Duty (VED) is something many owners don’t like paying for but it’s a necessity. 

There’s no getting away from it if you want the pleasure of putting your classic motor through its paces on UK roads.

Indeed, even if your vehicle falls into the ‘historic’ vehicle class exemption you still need to go through the VED process.

Taxation classes and costs

Engine size is the important factor if your classic was first registered before 1st March 2001.

At the current rates, if your beloved motor has an engine of 1549cc or below, you’ll pay £165 per year (or £86.63 every six months via direct debit); if your engine has over 1549cc under the bonnet, you’ll pay £270 per year (or £141.75 every six months via direct debit).

As you can see, unlike most other direct debit policies, the DVLA charges you more if you choose to spread the cost.

For very modern classics first registered between 1st March 2001 and 31st March 2017, the car’s CO2 emissions and fuel type are the determining factors. Vehicles range from Band A (up to 100g/km of CO2) to Band M (over 255g/km of CO2), attracting VED ranging from £0 to £580 per year.

However, even if your car is a higher-polluting modern vehicle, if it was first registered before 23rd March 2006, 12 months’ VED will cost a maximum of £330.

There are several options when applying to tax your car either online, by phone, or at a VED-issuing Post Office. You can find out more about the cost of VED for any vehicle on the government’s website.

Just as with finding the best classic car insurance, taxing your vehicle is easy if you know where to look.

Buying or selling a classic car

Whether buying or selling a classic vehicle, VED is not transferable and there are no exceptions to this rule. So, even if you’ve paid the purchase price it’s still illegal to drive home your dream car without taxing it.

Provided the V5C – or V5C/2 New Keeper section – is with the vehicle it’s a simple and straightforward procedure to do this over the phone or online.

As long as the car you’re selling has at least one complete month of unexpired VED, sending off the filled-in V5C to transfer ownership triggers an automatic refund from the DVLA.

Historic Vehicle taxation class

Once your classic has reached its 40^th birthday it can be reclassified as ‘historic’ and is eligible for free road tax as part of the Historic Vehicle taxation class. When deciding whether a car fits within this class it’s the production date rather than the date of first registration that’s the crucial factor.

The system updates on a rolling basis each year in April. So, April 2020 saw all vehicles built before 1st January 1980, become eligible for the Historic Vehicle exemption.

This means all 1979-produced vehicles can be reclassified. Therefore, each year that goes by brings more vehicles into this class. Great news for 1980’s enthusiasts!

In the happy event that your classic becomes eligible for reclassification, you first need to change Section 7 (the Tax Class section) of your V5C to ‘historic’.

Then simply sign and date the bottom of that page and take your V5C to a VED-issuing Post Office along with a completed V10 car tax application form and your MOT certificate.

Next, the Post Office will issue your car tax for free and will send your V5C to the DVLA. Finally, the DVLA will send you a replacement V5C in the post, plus a cheque for any unexpired VED.

Once you’ve done this for the first time you can simply tax your car each year online rather than having to visit a Post Office.

However, before breaking out the Champagne, your vehicle will not be exempt from vehicle tax if it’s used for hire or reward or it’s used commercially for a trade or business. Contact DVLA if you’re not sure if your vehicle is exempt.

Recently qualified ‘historic’ classics

If you like the sound of exemption from road tax, then we've taken a trip down memory lane to look at a selection of cars that were prowling the UK’s streets in 1979-80 and are now considered ‘historic’ classics.

Ford Capri Mk3

Still a great drive after all these years this affordable sports coupe was into its third generation by 1978 and remained in production until 1987.

Volvo 262c

Built in Turin from 1977-81, the distinctively low-roofed 262C was a luxury coupe that divided opinion at the time. Only 6,622 were produced, so it's a rare car. However, they were built to last so are still a reliable buy.

Porsche 928

Rolling off the production lines between 1978-95, the Porsche 928 combined beauty and power. While it’s still overshadowed by the famed 911, it has a growing following of enthusiasts and is a worthy addition to ‘historic’ classic status.

Mazda RX-7 Series 1    

Thanks to the compact styling, superb driving dynamics and smooth engine of this 2-door coupe, the Mazda RX-7 has remained a hit with car enthusiasts. While the RX-7 was produced from 1978-2002, the iconic Series 1 was only on sale for the first two years, so finding a used example can be difficult.

BMW 7 Series

The first generation of BMW’s flagship 7 Series was produced from 1977-87 and introduced a host of electronic features for the first time in a BMW. All models of this highly regarded luxury 4-door saloon were powered by 6-cylinder engines.

Classic car insurance for your historic vehicle

With over 35 years of experience in the specialist insurance market, the dedicated team at Lancaster Insurance can help you find the right cover for your ‘new’ classic car.

Call for an insurance quote today.

Policy benefits, features and discounts offered may very between insurance schemes or cover selected and are subject to underwriting criteria. Information contained within this article is accurate at the time of publishing but may be subject to change.