Do I Need to Pay Capital Gains Tax on a Gifted Car or Jewellery

At Towerstone, we provide specialist capital gains accountancy services for people gifting assets. We have written this article to explain when gifts trigger Capital Gains Tax, helping you make informed decisions.

This is one of those questions that sounds simple but in my experience quickly becomes confusing once people start reading snippets online or hearing half remembered advice from friends. Cars and jewellery feel personal. They are not shares or investment properties. So when someone gifts you a car or a piece of jewellery, or when you give one away yourself, it does not instinctively feel like something that should involve capital gains tax.

Sometimes that instinct is right. Sometimes it is very wrong.

Over the years, I have seen people unnecessarily panic about tax that does not apply, and others completely miss capital gains tax bills they genuinely owe. The difference usually comes down to understanding a few core rules about personal possessions, how HMRC defines a disposal, and how gifts are treated for capital gains tax purposes.

In this guide, I am going to explain clearly whether capital gains tax applies to gifted cars and jewellery in the UK, when tax is not an issue, when it can arise, and how HMRC looks at these situations in practice. I will also share common mistakes I see and what I advise clients to do to stay on the right side of the rules without overcomplicating things.

Capital Gains Tax and Gifts: The Basic Principle

The starting point for capital gains tax is this.

Capital gains tax is charged when you dispose of an asset and make a gain.

A disposal does not just mean selling something for cash.

For capital gains tax purposes, disposals include:

Selling an asset

Gifting an asset to someone else

Transferring ownership without receiving money

Exchanging one asset for another

This is the first point that often surprises people. Gifting something does not automatically avoid capital gains tax.

HMRC guidance on this principle is set by HM Revenue & Customs and published through GOV.UK.

However, whether tax is actually due depends on what the asset is.

Cars and Jewellery Are Treated as Chattels

Cars and jewellery fall into a category known as chattels.

A chattel is a tangible movable item of personal property. In simple terms, it is something you can physically own and move.

Common chattels include:

Cars

Jewellery

Watches

Antiques

Artwork

Collectables

Furniture

Chattels have their own special rules for capital gains tax, and this is where many people either relax too much or worry unnecessarily.

Do You Pay Capital Gains Tax on a Gifted Car?

In most cases, no.

Private motor cars are generally exempt from capital gains tax altogether.

This means:

You do not pay capital gains tax when you sell a private car

You do not pay capital gains tax when you gift a private car

It does not matter whether the car has gone up in value

The reason is simple. HMRC treats private cars as wasting assets.

A wasting asset is something with a predictable useful life of 50 years or less. Most cars clearly fall into this category.

From experience, this exemption covers almost all normal private vehicles.

When a Car Might Not Be Exempt

There are rare exceptions.

Capital gains tax may become relevant if:

The car is used for business rather than private use

The car is a classic or collector vehicle held as an investment

The car is owned by a company rather than an individual

Even then, HMRC usually treats cars as wasting assets unless they are genuinely investment pieces rather than vehicles.

In my opinion, for the vast majority of people gifting or receiving a car, capital gains tax is simply not an issue.

What If the Car Is Very Valuable?

This is a common follow up question.

People often ask about rare Ferraris, vintage Porsches, or limited edition supercars.

Even in these cases, HMRC’s default position is that cars are wasting assets and exempt from capital gains tax.

There can be edge cases where a vehicle is treated more like a work of art than a car, but these are extremely unusual and heavily fact dependent.

From experience, if you have to ask whether your car is subject to CGT, it almost certainly is not.

Do You Pay Capital Gains Tax on a Gifted Piece of Jewellery?

This is where things become more nuanced.

Jewellery is also a chattel, but unlike cars, it is not automatically exempt from capital gains tax.

Whether CGT applies depends on the value of the jewellery and how it is disposed of.

The £6,000 Chattels Rule

For chattels, HMRC applies a specific value threshold.

If a chattel is sold or gifted for £6,000 or less, it is generally exempt from capital gains tax.

This rule applies to jewellery.

So if you gift a piece of jewellery worth £6,000 or less:

There is no capital gains tax to pay

No gain needs to be reported

From experience, this covers most everyday jewellery.

Jewellery Worth More Than £6,000

If the jewellery is worth more than £6,000, capital gains tax may apply.

This is where people are often caught out.

Examples include:

High value watches

Antique jewellery

Diamond rings

Inherited family pieces

Designer or limited edition items

If you gift jewellery worth more than £6,000, HMRC treats this as a disposal at market value.

That means:

You are treated as if you sold it for its market value

A capital gain may arise

Capital gains tax may be due

In my experience, people often assume gifts are tax free. For high value jewellery, that assumption can be expensive.

How the Gain Is Calculated on Gifted Jewellery

The gain is calculated as:

Market value at the date of the gift

Less what you originally paid for it

Less allowable costs such as valuation fees

If the jewellery was inherited, the base cost is usually the probate value.

If the resulting gain exceeds your annual CGT allowance, tax may be due.

The Chattels Relief Calculation

For chattels worth more than £6,000, there is a special calculation that can limit the gain.

Instead of taxing the full gain, HMRC applies a formula that caps the taxable gain.

This often reduces the tax significantly.

From experience, this rule is frequently overlooked or misunderstood, leading to incorrect calculations.

Who Pays the Tax When Jewellery Is Gifted?

This is another key point.

Capital gains tax is paid by the person who gives the jewellery, not the person who receives it.

The recipient does not pay capital gains tax just for receiving a gift.

However, the recipient may face CGT later if they sell the jewellery and it has increased in value since they received it.

What If You Receive a Gifted Car or Jewellery?

Receiving a gift does not trigger capital gains tax for you.

There is no CGT simply because you were given something.

However:

You inherit the asset’s value at the time of the gift

That value becomes your base cost for future CGT calculations

If you later sell the jewellery for more than its value when you received it, you may have a capital gain.

Gifts Between Spouses and Civil Partners

Transfers between spouses and civil partners are treated differently.

In most cases:

No capital gains tax arises on the transfer

The recipient spouse takes over the original base cost

This applies to jewellery and other chattels.

From experience, this rule is often used for tax planning where high value items are involved.

What About Inheritance Rather Than Gifts?

If jewellery is inherited rather than gifted during lifetime:

There is no capital gains tax on inheritance

The jewellery is rebased to its market value at the date of death

This means any gain before death is wiped out for CGT purposes.

In my opinion, this is a very generous rule and often misunderstood.

Valuations Matter More Than People Expect

For high value jewellery, valuation is critical.

HMRC expects:

A reasonable market value

Based on professional valuations where appropriate

Undervaluing jewellery to avoid CGT is risky and often challenged.

From experience, HMRC is far more likely to question jewellery values than cars.

Reporting Capital Gains Tax on Chattels

If capital gains tax is due on gifted jewellery:

It is reported through self assessment

It is included in your capital gains section

It uses your annual CGT allowance

There is no special reporting system like there is for residential property.

Common Mistakes I See

From experience, the most common errors include:

Assuming all gifts are tax free

Forgetting the £6,000 chattels threshold

Ignoring market value rules

Using sentimental value instead of market value

Assuming the recipient pays the tax

Forgetting spouse exemption rules

Most of these mistakes are avoidable with basic understanding.

My Honest View From Experience

In my opinion, capital gains tax on gifted cars and jewellery is far less scary than people expect once the rules are understood.

Cars are almost always exempt.
Most jewellery is exempt because it falls under the £6,000 limit.
High value jewellery needs care, but reliefs exist.

The real problem is not the tax itself but assumptions.

From experience, people either overcomplicate this and worry unnecessarily or oversimplify it and miss genuine tax obligations.

Practical Advice If You Are Gifting or Receiving Jewellery

Based on years of dealing with this, my advice is:

Establish the market value honestly

Check whether the £6,000 rule applies

Keep purchase and valuation records

Consider spouse transfers where appropriate

Get advice before gifting very high value items

Do not assume gifts are automatically tax free

In my opinion, a short conversation before making the gift is far better than a long conversation with HMRC afterwards.

Where this leaves you

So do you need to pay capital gains tax on a gifted car or jewellery in the UK?

For cars, almost always no.
For jewellery, often no, but sometimes yes if the value exceeds £6,000.

The key is understanding that gifts are disposals for capital gains tax, but chattels have special rules that often remove or reduce tax entirely.

From experience, once people understand these distinctions, the confusion disappears and sensible decisions become much easier to make.

If you would like to explore related Capital Gains Tax guidance, you may find How can an accountant help me plan ahead for Capital Gains Tax and How can I reduce my Capital Gains Tax legally useful. For broader Capital Gains Tax guidance, visit our Capital Gains Tax hub.