Inheritance Tax on Classic Cars

TheChair95

Hello, I was wondering about the most efficient way to pass on a classic car. Anything to do with the seven year rule won't work at this stage. Would selling the car to a family member work?

Thanks in advance.

DE_612183

If you sell it for a £1 I don't think that will work.

If you sell it at market value, and then the inheritance tax is payable on the money in your account - that's fine.

Is it worth that much?

theoretica

Marry someone younger, pass the car to them tax free, they gift it and outlive the seven years.

Maybe not practical/desired, of course!

Jeremy535897

Consider capital gains tax first:
Provided that the car is not modified for racing use, to be (or become) a single-seater, or otherwise made unsuitable for private use, then it will remain exempt from capital gains tax under section 263 of the Taxation of Chargeable Gains Act 1992.
Does the car fit this definition?
Assuming it does, then inheritance tax is the issue. If you give it away or sell it at an undervalue, that is a gift subject to the seven year rule. It may also be a gift with reservation if you continue to benefit from the car in any way (even as a passenger). If you sell it at full market value, then you still have the cash in your estate, unless you spend it.

sheramber

What is the ontention for the car.

Is it to stay in the family?

It gifted to a museum or registered charity it would be exempt from IHT.

lincroft1710

What is the approximate current value of the car? 


If you no longer want the car then either gift it to the person you wish to have it or sell it and enjoy the money.


Do remember there is a likelihood of IHT rules changing in the very future.

Grumpy_chap

TheChair95 said:

Hello, I was wondering about the most efficient way to pass on a classic car. Anything to do with the seven year rule won't work at this stage. Would selling the car to a family member work?

Thanks in advance.

Is the estate at a value that will incur IHT?

TheChair95

The estate will definitely be subject to IHT. My intentions for the cars is for them to stay within the family, but I am looking for an efficient way to pass them on to try and bypass IHT. Some of them are quite rare so the market value would be difficult to assess.

Bookworm105

TheChair95 said:

The estate will definitely be subject to IHT. My intentions for the cars is for them to stay within the family, but I am looking for an efficient way to pass them on to try and bypass IHT. Some of them are quite rare so the market value would be difficult to assess.

"bypassing" IHT has been explained: gift them to someone else, never have anything to do with them ever again, and live for another 7 years.
No CGT, No IHT
(although in reality they'll probably be still sitting in your garage and you'll take them for a regular spin anyway but don't tell HMRC). 

TheChair95

As per my original question I don't have 7 years left unfortunately. 

Bookworm105

TheChair95 said:

As per my original question I don't have 7 years left unfortunately. 

then your question has been answered.
Expect to pay IHT,
or
take out a policy to cover the IHT bill,
or
sell the car(s) to your family member at open market value for cash based on a professional valuation as at now, but not a number you got from Classic Car magazine. In that case, the money is then (theoretically) still in your estate when you die, so no, you cannot bypass IHT when you have left it this late