Gifting a car to a family member, friend or charitable organisation is a common practice in the UK, but it involves specific legal and tax requirements that many people are unaware of. In 2026, the rules around transferring car ownership as a gift — rather than a sale — cover road tax, MOT requirements, insurance, and in some cases, tax implications. Here is everything you need to know.

The Difference Between a Gift and a Sale

For DVLA and legal purposes, a car transfer is either a sale or a gift. If any money changes hands, it is a sale. If no money is exchanged and the vehicle is transferred freely, it is a gift. This distinction affects the documentation, road tax position and potentially the tax treatment.

The Vehicle Registration Certificate (V5C) requires you to declare whether the transfer is a sale or a gift. Using a sale declaration when gifting — or vice versa — is a criminal offence.

How to Transfer Car Ownership as a Gift

  1. Complete the V5C transfer section: The seller (donor) fills in section 6 of the V5C registration certificate, signing the declaration that the transfer is a gift
  2. Give the V5C to the recipient: The recipient needs the completed V5C to register the vehicle in their name
  3. New keeper's declaration: The recipient completes their section of the V5C and sends the whole document to DVLA
  4. DVLA processes the transfer: DVLA issues a new V5C in the recipient's name within 2 weeks

Note: You should never fill in the V5C until the vehicle has been physically handed over. Once the V5C is registered, the previous keeper is no longer responsible for the vehicle.

Road Tax When Gifting a Car

Road tax does not transfer with the vehicle. When a car is gifted, any remaining months of road tax are refunded to the previous keeper automatically by DVLA. The new keeper must tax the vehicle before driving it on public roads.

However, there is a key exception: if the gift is to a registered charity, the charity may qualify for an exemption from vehicle excise duty. This applies to charities operating vehicles for charitable purposes and can significantly reduce the running costs of a donated vehicle.

Insurance for Gifted Cars

The gifted car must be insured before it can be driven. The new keeper has several options:

  • Add to existing policy: The new keeper can be added as a named driver to an existing policy
  • Take out a new policy: The new keeper takes out their own insurance policy
  • Use temporary cover: Short-term policies are available from 1 hour to 28 days

Insurers will require the V5C or at least the V5C/2 temporary registration slip to confirm the transfer. Driving without insurance is illegal, regardless of whether the car was recently gifted.

MOT Requirements for Gifted Vehicles

If the car is over 3 years old, it must have a valid MOT to be legally driven. The MOT does not transfer with ownership — if the MOT has expired, the car cannot be driven until it passes an MOT test. The new keeper should check the MOT status before collecting the vehicle.

Capital Gains Tax and Car Gifts

For HMRC purposes, gifting a car is generally not subject to Capital Gains Tax. Cars are exempt from CGT under HMRC's specific rules — the annual CGT exemption applies to assets generally, but cars have a statutory exemption regardless of value. This means you can gift a car worth any amount without CGT applying.

The only exception is if the car is a business asset — for example, a company car gifted to a director or employee. In that case, different rules apply, and HMRC guidance should be consulted.

Gifting a Car to a Family Member

Family car gifts are common between parents, grandparents and children. The process is identical to any other gift — complete the V5C transfer as a gift declaration. However, be aware:

  • The recipient must tax the car immediately
  • The recipient needs their own insurance before driving
  • If the recipient is a provisional licence holder, the car must be covered by appropriate insurance and display L plates
  • The donor is responsible for the vehicle until the V5C transfer is registered with DVLA

Gifting to Charity

Donating a car to charity is straightforward and offers potential tax benefits. Many charities accept car donations through schemes that either sell the car or use it for charitable purposes. In some cases, donors can claim income tax relief on the value of donated vehicles. Schemes such as Cars4Charity and GiveACar operate in the UK and handle the DVLA transfer and collection logistics.

Common Mistakes to Avoid

  • Not completing the V5C transfer: This leaves the previous keeper as the legal owner and responsible for any parking fines, SPEEDCAMERAS or toll charges
  • Transferring the V5C before physical handover: Never sign the V5C until the car has been handed over and any payment collected
  • Assuming road tax transfers: It does not — the new keeper must tax the car immediately
  • Forgetting to notify your insurer: Your existing policy will not cover the new keeper