Do I pay Capital Gains Tax when I sell my car in the UK?

Full answer

Motor cars are specifically exempt from Capital Gains Tax in the UK, no matter how large the gain. This exemption applies because HMRC treats cars as 'wasting assets' -- items with a predictable useful life of 50 years or less -- and, while machinery generally only gets full wasting-asset relief if it was used purely for personal enjoyment rather than business or investment, cars have their own specific statutory exemption under UK tax law (Taxation of Chargeable Gains Act 1992) that applies regardless of the reason for ownership. This is why classic and vintage car collectors, and investors who buy and resell rare cars for significant profit, pay no Capital Gains Tax at all on those sales, even where the gain runs into hundreds of thousands of pounds -- a notable contrast with other collectible assets like jewellery, art, watches and antiques, which only benefit from a £6,000 chattels exemption per item before tax applies. The exemption covers cars in the general sense used for personal or leisure purposes; it does not extend to certain specialist vehicles used wholly and exclusively as trading stock by a car dealer, where any profit is instead treated as trading income subject to income tax, or vehicles held within a company, where different Corporation Tax rules on capital allowances and disposals apply instead of personal CGT. If you sell a car at a loss, the wasting-asset exemption also means you cannot claim Capital Gains Tax relief for that loss, since the asset falls outside the CGT regime entirely in either direction. This exemption is a long-standing and stable feature of UK tax law, and there is currently no proposal to remove it, unlike other reliefs which have seen recent rate increases.

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