Don’t risk HMRC fines.
Want to get rid of your car but wondering if selling a car is taxable income in the UK? Let’s discuss the tax implications when selling your vehicle!
To understand whether you will be met with a tax bill after selling up, first, you have to understand Capital Gains Tax (CGT).
CGT is a tax on the profit you make when you sell an asset – a possession that is considered to have value. The first £12,300 won’t be taxed as it is within your capital gains allowance.
Watch our short video for an explanation of Capital Gains Tax in just ten seconds!
Cars are indeed assets, but they don’t fall into the same category as fancy pearls or acres of land. HMRC categorises cars as ‘wasting assets’ with a lifespan of fewer than 50 years – pretty savage, right?
Even if you opt to put this statement to the test and keep your motor for longer than 50 years, your car will still be exempt from CGT.
Other types of wasting assets include:
🚨 Major Alert 🚨
Although cars are considered wasting assets, if you routinely buy and sell cars with the intention of making a surplus, this can be classed as trading under the Corporation Tax Act 2010. You will be taxed on this income. In order for a car to be exempt from CGT, it must be solely for personal use.
Normal cars are more likely to depreciate rather than increase in value, so you can’t claim allowable losses or any tax relief when selling your vehicle. You can only claim allowable losses on chargeable assets – this includes:
Surprisingly, classic cars do not attract CGT – this is because they are still considered wasting assets, and not taxable income in the UK. This isn’t to say that classic cars cannot be a great investment!
Benjamin bought his Volvo P1800 over a decade ago. Today, it is worth £37,000, a whopping 84% increase since 2010. Although Benjamin will make a great profit from his vehicle, he will not have to pay Capital Gains Tax. Lucky Benjamin!
Not exactly. You will have to pay capital gains tax when selling the following vehicles:
But remember, you only pay capital gains tax on profit over £12,300, so unless your scooter was carved from gold, don’t worry too much!
We hope we’ve done a decent job at thoroughly answering one of our most commonly asked questions –Is selling a car taxable income UK? But we get it’s not always that simple!
If you’re still not 100% on whether you have to pay Capital Gains Tax or simply need advice regarding any other type of tax, we offer one-off tax advice from accredited accountants who are committed to making your taxes plain sailing.
Learn more about our tax advice service here.
Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.
"*" indicates required fields