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Just because you love your old banger, it doesn’t necessarily make it a classic. Or, at least, not by default.
There are actually two official definitions of what a ‘classic’ car is when it comes to your finances: one used for car tax purposes, and one used by HM Revenue and Customs (HMRC) when you look to sell your beloved automobile. On top of that, insurance providers will have their own thresholds for when you can get car insurance designed specifically for classic cars.
Whether or not your car is classed as classic can have important implications for your vehicle, from potential tax exemption to the benefits of specialist insurance.
While collectors may debate the definitions of what a classic car is, the Driver and Vehicle Licensing Agency (DVLA) and HMRC have their own opinions about what falls into that category.
In the eyes of the DVLA, for car tax – officially known as Vehicle Excise Duty (VED) – exemption purposes, a car is classic if:
However, if you meet the age criteria but you use your classic car for trade or business purposes, or if you use it for hire and reward (such as renting it out for weddings), it will not be tax-exempt.
Confusingly, HMRC provides its own definition of a classic car when it comes to selling your vehicle. Your car is classed as classic if:
Most of the time, when selling your car you will be exempt from capital gains tax (CGT).
However, if you are regularly buying and selling classic cars solely with the intention of making a profit, then this will be classed as trading. In that case, you will need to pay corporation tax at either 19 per cent or 25 per cent, depending on the level of your profits.
Beyond bragging rights – well, depending on your vehicle – there are a number of benefits that can come with having your car classified as classic:
you may be eligible for classic car insurance, which can be cheaper than standard car insurance
According to the DVLA definition of a classic car, you will not need to pay car tax from 1 April 2023 if your vehicle was either built before 1 January 1983, or first registered before 8 January 1983 (if you don’t know the build date).
Cars registered before 1 March 2001 – the tax bracket for any car that would meet the DVLA classic car definition – are required to pay from £200 a year (if the engine is 1,549cc or less), or from £325 (over 1,549cc). So by moving your car into the historic tax class, you could be saving yourself at least £200 a year.
It is important to note that even if your classic car is tax-exempt and you do not need to pay, you will still need to apply to put it in the historic tax class.
You can do this online, over the phone, or at a participating Post Office.
An MOT – the annual check to determine your car’s roadworthiness – is a legal requirement for most cars on the UK’s roads, after they have reached the third anniversary of their registration. But not ‘classic’ cars.
If your car was first built or registered more than 40 years ago, you will not need to have an MOT – as long as you have not made any substantial changes to the car in the last 30 years.
‘Substantial changes’ include replacing the chassis, body, axles or engine to change the way your car works.
You still need to monitor its condition, however, even without an MOT. If you are caught driving your classic car, and it is in a dangerous condition, you can be fined up to £2,500 and get three penalty points on your licence.
While the DVLA and HMRC have their own broad definitions of a classic car, motor experts break it down into further sub-categories. And since these categories can help determine your car’s valuation, it may affect the cost of your classic car insurance premium.
Although experts may debate the exact thresholds, broadly speaking they are as follows:
| Sub-category | Criteria | Example cars |
|---|---|---|
| Veteran | Built before 31 December 1904 | Rambler Model H, Ford Model A, Rolls-Royce 10HP |
| Edwardian | Built between 1 January 1905 and 31 December 1918 | Ford Model T Speedster, Fiat Model 2B, Sheffield-Simplex |
| Vintage | Built between 1 January 1919 and 31 December 1930 | Cadillac V-63, Alfa Romeo RL, Rolls-Royce Phantom Limousine |
| Post-vintage | Built between 1 January 1931 to 31 December 1945 | Morris Eight, Jaguar Mark IV, Lincoln Continental |
| Classic, or modern classic | Varies, but anywhere between 10 and 40 years old | Nissan Skyline GT-R, Ford Sierra RS Cosworth, Porsche 911 Turbo |
It’s well known that a new car starts to lose value the moment you drive it out of the dealership. With classic cars, that isn’t necessarily the case. They can hold their purchase value, and even start to increase in worth over time.
In fact, according to car insurer Hagerty’s Classic Index – which assesses the price of 50 cars that best represent the UK classic car market – prices have risen on average 18 per cent in the last five years.
Below are some of the factors that will inform how much your classic car is worth:
While you might not need to get an MOT for your classic car, keeping it in good condition not only means you can still legally drive it on the road – it might also help it keep, or increase, its value.
Essentially, the less work a buyer would need to do to restore a car, the higher the sale price could be.
You should keep an eye on:
Storing your classic car off-road, for example in a well-maintained garage, can help preserve the condition of your vehicle.
Keeping your car in pristine condition is only one part of the equation. A classic car’s value is hugely informed by how many of that car were originally produced, and are still available to purchase.
And rarity doesn’t always mean a car classed as veteran or vintage. Certain cars from the late 80s and early 90s are becoming increasingly rare, something that may only help their value go up.
Another factor that can inform the value of your classic car is its popularity. Some classics are deemed as such because of an iconic design, or the status associated with owning that particular car. This means that, even if a car isn’t rare, it may still attract a decent price if it has been kept in good nick.
If you have restored your classic car, the quality of the job you’ve done will play a part in dictating the price you can charge for it.
Some collectors will want to see evidence that original parts have been used, to give the car that ‘authentic’ feel. Others may want a classic design modded with modern perks, such as bluetooth or satnav. It depends on the car, and buyer, in question.
Some factors that affect the value of a classic car are more intangible than others. For example, if someone has treasured childhood memories associated with a specific vehicle – maybe it was a car their parents drove, or one they always wanted but were too young to buy – they may be willing to pay more for a car than the market would necessarily dictate.
Tied to nostalgia is the cultural impact a car has had. There are some obvious examples from TV and film – case in point any car driven by James Bond, like the Aston Martin DB5, or Doc Brown’s DeLorean from Back to the Future. But it also extends to truly iconic designs, such as the Volkswagen Beetle, or record-breakers, like the Bugatti Veyron.
A classic car isn’t just for looking at. Many enthusiasts will want to take their car out for a spin, or even use it for their daily drives. In that case, the roadworthiness and usability of the car, beyond just its condition, will be of importance.
Whether a newer car can be considered a classic depends on what you mean by ‘new’ and what you mean by ‘classic’.
In the eyes of enthusiasts, a newer car might not meet the standards set by the collectors’ market, although there’s a potentially lucrative market in trying to identify future classics from the last decade.
However, for HMRC, a car made just 15 years ago, in 2008, would meet the classic label if it was worth over £15,000. That’s much sooner than the DVLA, where a classic has to be at least 40 years old.
What this does mean is that new cars are becoming ‘classic’, at least in the legal sense, every year. But just because the DVLA or HMRC deems it a classic, that doesn’t mean you will be able to make a fortune on the collectors’ market.
Despite the DVLA and HMRC definitions of a classic car, there is no hard and fast rule about when a car becomes a classic for insurance purposes.
While some cars are obviously classics – essentially anything over 40 years of age – newer, ‘modern’ classics are more difficult to define. The age criteria insurers use normally ranges between 15 and 25 years old.
It is possible to obtain classic car insurance from mainstream providers, alongside specialist insurers. And as with standard car insurance, you can choose between third party, third party, fire and theft, and fully comprehensive insurance.
There are a number of ways in which classic car insurance can differ from normal car insurance, including:
Every year there will be a new crop of cars that will be considered classics by the DVLA, HMRC and insurance providers. This would not only entitle you to stop having MOTs and paying car tax, but could also unlock classic car insurance as an option.
Using a 40-year threshold, here are some cars that should become classics in the next few years:
| Name of car | Manufacture dates | When model becomes a ‘classic’ | Current average value (at Classic.com) |
|---|---|---|---|
| Porsche 911 3.2 Carrera | 1984-1989 | 2024 | £55,978 |
| Volkswagen Jetta A2 | 1984-1992 | 2024 | £10,952 |
| Chevrolet Corvette C4 | 1984-1996 | 2024 | £17,345 |
| Ferrari 328 | 1985-1989 | 2025 | £79,955 |
| Peugeot 309 | 1985-1994 | 2025 | £19,540 |
| Mercedes-Benz E W124 Sedan | 1986-1995 | 2026 | £21,023 |
| BMW M3 Coupe E30 | 1987-1991 | 2027 | £60,264 |
A classic car isn’t guaranteed to gain in value the older it gets. It depends on the condition of the car itself, the popularity or rarity of the car at any given time, and the nostalgia factor associated with that vehicle. So some cars will increase in value, while others may fall.
If you stop driving your classic car, and make a Statutory Off Road Notification (SORN), you are not legally required to have insurance. However, you may still want to at least consider third party, fire and theft insurance, to ensure you can still recover your losses if your car is stolen or damaged while sitting in your driveway or garage.
