Want to know the tax implications when you sell a classic car in the UK? Whether you’re swapping out your BMW Alpina for something new or you simply no longer need a vehicle altogether, there are a few things you should know before selling up!
First of all, how does a car become ‘classic’?
Some argue that once a car is 25 years old, it automatically becomes a classic car; some say 30 years and others say 40. Some even argue a classic car depends on the make and model just as much as the age.
As you can see, there is no general agreement. But HMRC will consider your car a classic if it meets these two requirements:
- It’s over 15 years old
- It’s worth £15,000 or more
But not all cars over 15 years old are classed as classic. Many people aren’t aware, but there are multiple categories for old vehicles, including vintage, veteran and post-vintage cars.
So, will I have to pay Capital Gains Tax on a classic car?
Good news! Most cars are exempt from Capital Gains Tax (CGT), even classics. Why? Simply because they are deemed ‘wasting assets’ with a lifespan of under 50 years.
CGT only applies to valuable assets such as:
- Property
- Jewellery
- Antiques
- Art
This basically means HMRC doubts you will make a profit from selling your car, and for this reason, if you do prove them wrong, you get to keep all of your gains! So it’s a win-win situation really!
Does this mean that I can buy and sell classic cars in the UK without any tax liability?
Not so fast! This is where it can get a little techy.
Yes, you can buy a classic car, use it for normal day-to-day driving, decide you no longer want it for whatever reason and sell it. You won’t have to pay tax for this.
But if HMRC suspects you are purchasing classic cars and selling them with the sole intention of making a profit, this is classed as trading. And it’s taxable at either 25% or 19% depending on how much is earned.
This is called Corporation Tax.
What about vehicle tax?
You may have escaped Capital Gains Tax, but all cars, including classic cars, still require vehicle tax (also known as road tax).
However, there is an exemption – if your car is 40+ years old (manufactured more than 40 years before 1st January of that year) you will no longer have to pay to tax your vehicle.
Bear in mind that vehicle tax is the responsibility of the registered owner.
If you’ve had a car for over 25 years, then you have probably been driving long enough to remember the days when you could transfer your existing tax to another vehicle, however, this is no longer the case.
So, once you’ve said your goodbyes to your vehicle:
- You will likely receive a refund
- The new registered owner will have to sort out the tax
Want an extra helping 👋?
Capital Gains Tax, Corporation Tax, Vehicle Tax… it can all be a bit mind-boggling. That’s why we offer a range of services that ensure you won’t have to deal with the tricky stuff! Check out our services here.
FAQs
You won't have to pay tax for this. But if HMRC suspects you are purchasing classic cars and selling them with the sole intention of making a profit, this is classed as trading. And it's taxable at either 25% or 19% depending on how much is earned. This is called Corporation Tax.
Is the sale of a classic car taxable income? ›
Collector's Cars or Classic Cars. Collectors' cars, antique vehicles, or classic cars can appreciate in value over time. If you own such a car and sell it, it may result in a significant capital gain and a potential tax liability.
Is selling a car taxable income UK? ›
If you're in the process of selling your car, you may wonder if you need to pay the taxman (or woman) any money from the proceeds. The short answer is 'no', you do not need to pay any tax when selling your car, though there are some limited circ*mstances in which you might, which is what we will cover in this guide.
Are classic cars exempt from inheritance tax in the UK? ›
Some rare classic cars might be exempt from inheritance tax if they are considered by HMRC to be of sufficient scientific, historic or artistic interest. Outside of this, classic cars are treated by HM Revenue & Customs in the same way as other possessions.
Is there VAT on classic cars UK? ›
A reduced VAT rate of 5% applies to the importation of qualifying classic cars. Classic cars are for VAT purposes defined as cars at least 30 years old. HMRC also allow the reduced import rate for a car not more than 30 years old where it is: extremely rare.
Are classic cars considered assets? ›
Classic cars are personal and sentimental assets most people want to keep in the family and direct which family members inherit them. A California trust is one way to ensure your wishes are followed after you are gone.
How do you calculate capital gains on a car sale? ›
How to Calculate Long-Term Capital Gains Tax
- Determine your basis. The basis is generally the purchase price plus any commissions or fees you paid. ...
- Determine your realized amount. ...
- Subtract the basis (what you paid) from the realized amount (what you sold it for) to determine the difference. ...
- Determine your tax.
You can sell as many "private cars" as you like without paying tax on the sale because the UK considers these wasted assets. If you're selling a commercial or business vehicle (i.e., vans, sports cars), however, the sale will be subject to capital gains tax every time. You must report the sale to HMRC.
Is there Capital Gains Tax on cars in the UK? ›
You don't usually need to pay tax on gifts to your husband, wife, civil partner or a charity. You don't pay Capital Gains Tax on: your car - unless you've used it for business. anything with a limited lifespan, eg clocks - unless used for business.
How to avoid Capital Gains Tax in the UK? ›
Here, Telegraph Money explores six of the options open to savvy investors who want to prevent their CGT bill going through the roof.
- Max out your allowance. ...
- Make use of tax-free wrappers. ...
- Enterprise Investment Schemes. ...
- Transfer assets to husband, wife or civil partner. ...
- Claim for losses. ...
- Private residence relief.
To apply for free road tax and classic vehicle MOT exemption from 1 April, you must be able to prove your vehicle's road tax exemption age – that it was built more than 40 years before 1 January of that year. To register your classic vehicle as historic, you'll need to change the V5C registration document.
How old does a vehicle have to be in the UK to be tax exempt? ›
Vehicles exempt from vehicle tax
If your vehicle was built before 1 January 1984, you can stop paying vehicle tax from 1 April 2024. If you do not know when your vehicle was built, but it was registered before 8 January 1984, you do not need to pay vehicle tax from 1 April 2024.
What is classed as a classic vehicle in the UK? ›
So, at what age does a car become a classic in the UK? HMRC considers a classic car to be at least 15 years old, with a market value greater than the list price and at least £15,000. That could mean a car manufactured as recently as 2007 could be classed as a classic.
Who is exempt from car tax UK? ›
You can apply for exemption from paying vehicle tax if you get the: Higher Rate mobility component of Disability Living Allowance (DLA) Enhanced Rate mobility component of Personal Independence Payment (PIP)
How much to import a classic car from the USA to the UK? ›
How much does it cost to import a car from the US to the UK?
| Type | Cost |
|---|
| Shipping agency fees | Starting from £521 ($650 USD)³ |
| Import duty (if applicable) | 10%³ |
| VAT (if applicable) | 20%³ |
| DVSA inspection fee for Individual Vehicle Approval (IVA) | £199 to £294⁶ |
fill in form V765 - 'Application to register a vehicle under its original registration number' get form V765 endorsed by a vehicle owners' club. provide a recent photo of the vehicle and documentary evidence that links it to the original number, for example the original log book (V5C)
Do you have to report the sale of a car to the IRS? ›
If the car was a personal asset, report the sale on an Internal Revenue Service (IRS) Form 1040, Schedule D. If you used it for business purposes, report the sale on Form 4797 or Form 8824.
What happens when you sell a depreciated vehicle? ›
Selling Depreciated Assets
When you sell or trade in a used asset, you may trigger a taxable capital gain or “recapture” of previous depreciation deductions. Recapture is generally taxable at ordinary income tax rates but, in some situations, it can be taxable at both ordinary rates and capital gains rates.
How to avoid capital gains tax on collectibles? ›
One other approach is, rather than selling the collectible, donating it to a qualified charity. With this route, you'll receive a charitable-giving related tax deduction rather than a capital gain. The exact amount of the deduction will vary depending on what the qualified charity does with your collectible.
Does selling a business vehicle count as income? ›
On the condition that you use your business vehicle 100% of the time for work-related tasks, the above information complies directly to business owners. With that said, selling a business vehicle is subject to taxation. During the sale process you must pay a tax on a gain or you can claim a deduction for a loss.
