We do not give financial advice, we work with your chosen advisor to assist.
Introduction to Capital Gains Tax (CGT)
In the UK, Capital Gains Tax (CGT) is a tax on the profit made when you sell or dispose of an asset that has increased in value. CGT is only paid on the gain or profit — not the total amount of money you receive from the sale. However, not all assets are subject to CGT, and one area of frequent confusion concerns whether personal vehicles, particularly cars, are liable for CGT.
For most personal car owners, the good news is that the sale of a private car typically does not attract Capital Gains Tax. However, there are exceptions and specific circumstances where it might apply. Let’s explore the rules and nuances surrounding CGT for personal car owners.
Are Personal Cars Liable for Capital Gains Tax?
In general, personal cars are considered "wasting assets" under UK tax law. A wasting asset is defined as an item with a useful life of 50 years or less, which naturally loses value over time through wear and tear or obsolescence. Because personal cars typically depreciate rather than appreciate, they fall into this category. As a result, most personal cars are exempt from Capital Gains Tax.
*Please consult your Wealth Manager or Accountant to seek clarification.
The Wasting Asset
The Wasting Asset
The Wasting Asset
Some cars are unique as they can retain their value but also grow in value, they can also be traded globally, offering a secure alternative investment opportunity.
Chattel
The Wasting Asset
The Wasting Asset
A wasting asset that are exempt from Capital Gains Tax in the UK, provided they are not utilised for business purposes. As a private individual, if you hold such assets, you may benefit from this exemption.
Return
The Wasting Asset
Return
*Car investments are robust against inflation, making them a valuable asset class during times of rising prices. Their ability to maintain value can provide diversification option over traditional assets.