How many cars can you sell in a year before you are a trader in the UK?

There is no set number in HMRC or Trading Standards guidance. HMRC uses the badges of trade, so a few cars bought cheaply, tidied up and sold quickly can point to trading, while selling your own car every few years usually does not.

Do I need trade plates to sell cars?

No, but trade plates let a motor trader drive untaxed and unregistered vehicles for set purposes, such as customer test drives. To get them you generally need to be a motor dealer, trader or vehicle tester and hold motor trade insurance.

Is there motor trade insurance for part-time car sellers?

The test for whether you are trading is about what you do, not how many hours you spend doing it. Part-time traders can ask a specialist broker about motor trade cover and give honest figures for how many cars they handle and who drives them.

Rules and law

Car insurance for trade: when selling cars needs motor trade cover

Q: Can I sell cars on my personal car insurance?

You can sell your own car privately on your normal policy. Buying cars specifically to resell for profit is a trade activity, and a personal policy is set up for purposes unrelated to a trade, so check the policy wording and tell the insurer what you are doing.

Car insurance for trade explained: when buying and selling cars makes you a trader, why a personal policy may not fit and when trade plates apply.

Car insurance for trade, usually called motor trade insurance, comes into the picture once you are buying cars in order to sell them on for a profit rather than selling your own car now and then. There is no fixed number of sales that makes you a trader in the UK, but regular buying and selling, doing cars up to sell, and a clear profit motive all point towards trading, and at that stage a personal car policy may no longer match what you are doing.

The rest of this guide explains how the trader question is judged, what it means for insurance, test drives and trade plates, and what to check before you buy your next car to sell.

How many cars can you sell before you are a trader in the UK?

There is no magic number. Neither HMRC nor Trading Standards sets a count of cars per year that turns a private seller into a trader. The Trading Standards guidance on selling used vehicles does not give a threshold, and HMRC's guidance says whether there is a trade is decided on the overall impression from what it calls the badges of trade.

HMRC's badges of trade include:

Profit-seeking motive. An intention to make a profit supports trading, but on its own is not conclusive.
Number of transactions. Systematic and repeated transactions support trade.
Changes to the asset. Repairing, modifying or improving something so it sells more easily or for more money points to trading.
The way the sale is carried out. Selling in a way that is typical of a trading business.
Time between buying and selling. An intention to resell shortly after buying supports trading.
How the asset was acquired. Something inherited or given to you is less likely to be the subject of a trade.

No single badge decides it. As an example, someone who sells their own car after five years and buys another is very unlikely to be trading. Someone who buys a couple of cars a month at auction, valets them, fixes small faults and lists them online a fortnight later is showing several badges at once.

If HMRC does see it as a trade, the £1,000 trading allowance may cover very small amounts of trading income, and gross trading income over £1,000 means registering for Self Assessment.

Can I sell cars on my personal car insurance?

Selling your own car privately now and then is normal. The difficulty starts when the cars you insure are stock.

A personal car policy is a consumer insurance contract. The Consumer Insurance (Disclosure and Representations) Act 2012 defines that as a contract with an individual who takes it out "wholly or mainly for purposes unrelated to the individual's trade, business or profession". Buying cars to sell on for profit is, by its nature, a trade purpose. Under section 2 of the same Act, you have a duty to take reasonable care not to make a misrepresentation to the insurer, which includes describing how a car is used.

In practice, this is where private sellers get caught out:

Each car you buy needs insuring before it goes on the road. GOV.UK is clear that you must have motor insurance to drive a vehicle on UK roads, and that third party cover is the legal minimum.
The use you declared may not cover dealing. Personal policies ask about social, commuting and business use. Buying and selling cars as a sideline is a different activity, so read the policy wording and ask the insurer rather than assume.
Swapping cars every few weeks. Adding and removing cars from a personal policy over and over is a sign of the activity itself, and every change has to be declared accurately.

The cost of getting it wrong is not just a refused claim. Driving without valid insurance can lead to a £300 fixed penalty and 6 penalty points, or in court an unlimited fine and disqualification, and police can seize the vehicle.

Car insurance for trade use: who is covered on a test drive?

Whoever is behind the wheel on a public road has to be insured to drive that particular car.

On a private sale, the seller's policy may only cover the named drivers on it, and a buyer's own policy may or may not extend to driving other cars. If neither policy covers the buyer in your car, the test drive is uninsured driving. For traders, test drives are one of the main reasons for trade plates. GOV.UK gives the example of a car seller using trade plates so customers can test drive vehicles on a road. The plates can only be fitted to vehicles that are safe, insured and have a valid MOT or are exempt, according to the rules for using trade plates.

Situation	Who needs to be insured	What usually covers it
Selling your own car once	The buyer on a test drive	The buyer's or seller's policy, if it covers that driver in that car
Buying a car to sell on	You, from the moment you drive it	A policy that fits a trade purpose
Customers test driving stock	Each customer driving	Motor trade cover for customer drivers, often with trade plates
Moving untaxed or unregistered stock	You or your staff	Motor trade cover plus trade plates for the permitted purpose

Trade plates for car traders: who can get them?

Trade licence plates are number plates for vehicles a motor business uses for things like selling, repairing or testing. Vehicles carrying them can be driven for certain purposes without being registered and taxed. You can apply if you are a motor dealer, motor trader or vehicle tester (vehicle collectors and deliverers can also apply in some cases) and your business sells vehicles, manufactures or repairs them, or tests other people's vehicles on public roads.

The key link to insurance is in the application rules. GOV.UK says you need motor trade insurance and must send a copy of your Motor Trade Insurance Certificate with form VTL301, and that if you have a different type of insurance the application will not be approved. The name on the certificate must match the name on the form.

The steps are:

Arrange motor trade insurance in the same name you will apply under.
Fill in form VTL301 and choose which plates you need (vehicles, motorcycles and tricycles, or both).
Send a copy of your insurance certificate, not the original.
Pay the licence fee, which for vehicles ranges from £97.35 to £177 depending on the month you apply, with the licence lasting between 6 and 12 months.
Use the plates only for the purpose written on your application, displayed front and back and readable from 20 metres.

Motor trade insurance for part-time car sellers

Part-time does not mean exempt. The badges of trade look at what you do, not whether you have another job. A weekend seller who buys, prepares and sells cars regularly can be trading just as much as a full-time dealer, only on a smaller scale.

Once you are trading, other rules apply as well as insurance. The Trading Standards guide says it is a banned practice for a trader to falsely give the impression they are a private seller, and traders selling to consumers take on duties under the Consumer Rights Act 2015, such as goods being of satisfactory quality and as described. The same guide says any seller, trader or not, must describe a vehicle correctly, and the Road Traffic Act 1988 makes it illegal for anyone to sell an unroadworthy vehicle. Traders also have their own route for telling DVLA when they buy a vehicle into the trade.

If you are under 25, there is a separate guide on motor trade insurance under 25.

What affects the price of car trading insurance?

Motor trade cover is priced on the risk of the activity, so the price depends on your own details. To give a broker a fair picture, have these ready:

roughly how many cars you buy and sell in a year, and their typical value
whether you sell from home, a forecourt or online only
who will drive (you, staff, customers on test drives) and their ages and driving records
where cars are kept overnight and how they are secured
any claims or motoring convictions
whether you also repair, valet or modify cars

There is more detail in our guide to motor trade insurance cost in the UK.

If you are unsure whether your car buying has tipped into trading, Kompare can put you in touch with a specialist FCA-authorised broker from its panel who can talk through how you operate and what cover is available. Being open about the number of cars and how you sell them is what keeps any policy valid.