Friday July 12, 2013
We all remember that government campaign a few years ago claiming that tax doesn’t have to be taxing. Unfortunately, the reality for a lot of classic car owners is that calculating and settling the right amount of tax really can be quite taxing and, if nothing else, it’s a very time consuming process. Every classic car owner’s tax liability varies depending on their circumstances, but to get you started here’s a quick guide to the sort of taxes that commonly affect classic car owners.
Road tax affects more classic car owners than many people think. As of July 2013, the current law states that any car made before 1 January 1973 (anything more than 40 years old) is exempt from road tax. This still catches a lot of the late 70s classics and has, historically been a rolling scheme, but this was changed by chancellor George Osbourne in March 2013.
Whether you’re exempt or not, you still have some form of road tax liability: vehicles that aren’t exempt will have to pay road tax and those that are still need to apply for a tax disc that will display a nil-value. These rules aren’t set in stone, either, so beware about your current liability.
Capital Gains Tax
The murky world of capital gains tax catches a lot of classic car drivers out and there are many complex rules surrounding what you do and don’t need to pay. In general, if you sell an asset (a classic, for example) that turns out a profit of more than £10,600 you are liable to pay 28% in these assets.
Classic cars are, however, exempt from capital gains on the grounds that they are ‘wasting’ assets with an expected life of 50 years or less (and thus, not capital) and there is a special exemption for ‘passenger vehicles’. However, that doesn’t mean the taxman won’t want to know if you make some money off a classic sale: speak to a financial advisor if you are in doubt about the status of your car.
Classic Car Businesses
Are you a classic car dealer? Most of us would say no, but if you’ve sold and bought classic cars on a regular basis you could be considered as having a ‘trade’ for tax purposes. The conditions for carrying on a trade are quite complex but it works on the basis of selling stock regularly for the sole purpose of profits.
If you are selling cars with enough regularity to be considered as a trader, you need to pay between 20% and 26% depending on how big your turnover is and when the trades were made. This fraction is taken from your profits and it is worth seeking financial advice in this case.
It’s quite possible to be a classic car owner and pay absolutely no tax at all, but very often classic car owners are hit with unexpected bills. Don’t get caught out, always seek advice in the case that you’re unsure and remember that tax is your responsibility to get right.