Impact on TC of selling car.

Paperweight

My wife and I are currently receiving both WTC and CTC. I have a car worth just over £20k which I want to change. If I part exchange my current car against the newer one (which is very slightly more expensive) I will just pay the small difference. However, if I sell my car privately first and then buy the newer car with the proceeds, I will receive £20,000 into my bank account which I will then spend on the newer car after the monies have cleared. How would this cash deposit be viewed by HMRC? Will they say that I should not have spent such a sum on a car and that my TCs need to be adjusted because of my new found capital wealth or will they accept that it is just changing one car for another?

alwaysonthego_2

It will be okay as TCs only treat any interest on the money over £300 per year as part of your income, they don't look at capital per se. As you will not be gaining any interest on this money you don't need to declare it.

shedboy94

If you are receiving WTC you must be earning quite a low income - well under £20000 - how can you afford to buy a car worth significantly more than your annual income?

Paperweight

shedboy94 wrote: »

If you are receiving WTC you must be earning quite a low income - well under £20000 - how can you afford to buy a car worth significantly more than your annual income?

When I was made redundant the car was part of the redundancy package. Because I know people in the motor trade I can usually buy cars at trade value. If I change my car about once a year I can effectively own a car without any depreciation costs.

Paperweight

alwaysonthego wrote: »

It will be okay as TCs only treat any interest on the money over £300 per year as part of your income, they don't look at capital per se. As you will not be gaining any interest on this money you don't need to declare it.

Thanks for this. Does the same apply to council tax benefit? I am sure I read somewhere that if I had savings of over £16,000 I would lose the benefit.

alwaysonthego_2

Paperweight wrote: »

Thanks for this. Does the same apply to council tax benefit? I am sure I read somewhere that if I had savings of over £16,000 I would lose the benefit.

it is different with CTB, it could be viewed as deprivation of capital, so you really need to speak to them as they may question why you have spent the full amount on another expensive car, hth

Paperweight

alwaysonthego wrote: »

it is different with CTB, it could be viewed as deprivation of capital, so you really need to speak to them as they may question why you have spent the full amount on another expensive car, hth

Thanks again. I will call the CTB people now.

Elvisia

I'd definitely talk to them, and get whatever they say in writing. If you ring them you can ask them to write and confirm what they've said. Sounds a bit OTT but there are plenty of cases on here (and me personally!) where stuff has been declared but not written done and there have been problems at a later date.