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Classic Car

Also known as: Vintage Car, Collector Car

Definition

A classic car is an older vehicle (typically 20+ years) valued for its age, rarity, or historical significance that forms part of your estate and must be valued for inheritance tax purposes.

Unlike ordinary vehicles that depreciate, classic cars maintain or increase in value, making them collectible assets requiring careful estate planning.

What Does Classic Car Mean?

There's no single legal definition for classic cars in UK law—different authorities use different criteria. The DVLA classifies vehicles 40 years or older as "historic vehicles" qualifying for vehicle tax exemption, while insurance providers typically consider cars 20-25 years old as classics. However, age alone doesn't determine classic status. Rarity, condition, originality, and market demand matter equally. Under UK law, classic cars are classified as tangible moveable property (chattels) and machinery. While most classic cars are chattels, those held primarily as investments may fall outside the statutory personal chattels definition under the Inheritance and Trustees' Powers Act 2014, which affects how they're treated in estate administration.

Classic cars have complex tax treatment that confuses many owners. While they're exempt from capital gains tax when sold—classified as "wasting assets" under HMRC Capital Gains Manual CG76906 because they're machinery with a predictable life under 50 years—they are NOT exempt from inheritance tax. Classic cars form part of your taxable estate and are subject to 40% IHT on estates over £325,000 (£500,000 with the residence nil-rate band if leaving your home to direct descendants). For example, David owns a 1965 Jaguar E-Type valued at £85,000. If he sold it during his lifetime for a £30,000 profit, no capital gains tax would be due. However, when he dies, the £85,000 counts toward his estate for IHT purposes. A rare exemption exists for heritage assets of national scientific, historic, or artistic interest, but this requires meeting strict conditions including public access arrangements and is extremely uncommon.

Professional valuation is essential for classic cars due to their condition-dependent market value. HMRC requires independent professional valuations at the date of death for probate and IHT purposes—DIY valuations or online tools are typically rejected for collectible classics. Specialist classic car valuers charge approximately £90-150 plus VAT for vehicles under £50,000, providing the detailed documentation executors need for probate applications and IHT returns. You can include classic cars in your will through several approaches: as a specific legacy naming the exact vehicle and beneficiary ("I leave my 1972 Porsche 911 to my son James"), as part of general chattels ("I leave all my personal chattels to my wife"), or in your residuary estate where executors sell the vehicle and distribute proceeds. Many owners include a letter of wishes providing guidance about care, maintenance preferences, or potential buyers, which while not legally binding, executors typically follow.

Common Questions

"Do I need to include my classic car in my will?" Yes, you should include your classic car in your will if it has significant value or sentimental importance. Classic cars form part of your estate and are subject to inheritance tax like any other asset. You can leave it to a specific person as a legacy, include it in your residuary estate, or give your executors instructions to sell it and distribute the proceeds.

"Will my family have to pay inheritance tax on my classic car?" Classic cars are subject to inheritance tax (IHT) at 40% on estates valued over £325,000 (£500,000 if leaving your home to direct descendants). The car's value at the date of death counts towards this threshold. Unlike capital gains tax, there's no wasting asset exemption for IHT, though rare cars of national scientific, historic, or artistic interest may qualify for heritage asset relief.

"How should my classic car be valued after I die?" Classic cars must be valued at their open market value on the date of death for probate and inheritance tax purposes. Due to their rarity and condition-dependent value, HMRC typically requires professional independent valuations from specialist classic car valuers. These valuations (usually £90-150 plus VAT for cars under £50,000) provide the documentation executors need for probate applications and IHT returns.

Common Misconceptions

Myth: Classic cars are tax-free investments—no capital gains tax when I sell and no inheritance tax when I die.

Reality: While classic cars are exempt from capital gains tax when you sell them (as "wasting assets"), they are NOT exempt from inheritance tax. Classic cars form part of your taxable estate and are subject to 40% IHT on estates over £325,000. The CGT exemption only applies during your lifetime.

Myth: My classic car will automatically go to my spouse or children when I die, so I don't need to include it in my will.

Reality: Without a will, classic cars are distributed according to intestacy rules, which may not match your wishes. Even if your spouse is entitled under intestacy, executors must still obtain probate, value the vehicle, pay any IHT due, and formally transfer V5C ownership. A will provides clear instructions and can include specific wishes about maintenance or sale.

  • Art and Collectibles: Broader category of valuable collectible assets that share identical IHT treatment, similar professional valuation requirements, and comparable estate planning considerations with classic cars.
  • Chattels: Classic cars are a specific type of chattel (tangible moveable property), though investment-grade classics may fall outside the statutory personal chattels definition.
  • Movable Property: Classic cars are movable assets (versus immovable property like land), which affects jurisdiction, transfer processes, and estate administration procedures.
  • Valuation: Professional valuation is critical for classic cars due to their condition-dependent market value and HMRC's strict requirements for probate and IHT calculations.
  • Capital Gains Tax: Understanding the CGT exemption for classic cars (as wasting assets) helps clarify what taxes DO apply (IHT) when planning lifetime gifts versus death transfers.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.