It is normally recommended, but not a legal requirement, that you limit the towing gross weight to a maximum of 85% of the towing vehicles weight.
You can exceed this, up to the maximum towing weight specified by the towing cars manufacturer, but for safety, the 85% rule is good for an unbraked trailer.
The law changed in 1997 with respect to the catagories specified within the standard UK car driving license. The government website is not easy reading.
As far as I can make out, they changed the licensing after 1st Jan 1997.
If you have a post 1st Jan 1997 license, you do not have catagory B+E, you only get B which means you can drive up to:
A 3500kg vehicle with up to eight seats, with a 750kg maximum trailer.
A vehicle and trailer, where the total combination of the trailer, its load to be carried, plus the maximum legal laden weight of the towing car (even if you are driving alone so it's not at this maximum of car + passenger limit) is no more than 3500kg.
That means that most people with a license issued after 1996 will not be allowed to drive a car towing another car on a trailer, unless the car being towed is very light.
(Eg, an E34 M5 weighs about 1750kg, so the max laden weight, I'd guess five passengers at over 120kg each, means roughly 2350kg+, add a trailer, (250kg?), leaves only 900kg for the car. Doh!)
Pre 1997 licences have catagory B+E and retain it, so can drive "Combinations of vehicles consisting of a vehicle in category B and a trailer, where the combination does not come within category B" which isn't very helpful with regards to maximum weight, but presumably the C1E catagory kicks in with it's pre 1997 8250kg maximum weight total. But, also note the caveat that the total weight being towed, trailer plus load, must not be more than the unladen weight of the towing car.
That means that basically you can't tow an E34 with another E34 unless you've stripped more than the weight of the trailer out of the car being trailered about!
