On 30 October 2024 Rachel Reeves delivered her, and Labour’s, first budget for over 14 years. How does it affect wine investors?
Despite the pre-Budget leaks and media commentary, very few people predicted the detailed outcome, of Chancellor Reeve’s first Budget. Time will tell whether the measures will fund significant improvements to services, particularly health and education, and stimulate sufficient economic growth to prevent further tax raising measures or allow for future reductions.
The Budget and Fine Wine
In the context of investing in fine wines my predictions in previous Vin-X media releases have proved to be correct. In short, the two main Capital Gains Tax reliefs, Wasting Asset and Chattels Exemption, that make investing in fine wine efficient for tax purposes, remain intact.
A Wasting asset is one with an expected life at purchase of 50 years or less and a Chattel is a tangible asset with a value of less than £6,000. For more details on the application of these reliefs see my post-election Report on The Tax Treatment of Wine Investment.
Capital Gains Tax (CGT)
The changes to the rate of Capital Gains Tax for individuals were significantly below what I had predicted, and by most if not all commentators, and remain like for like the lowest applied by any G7 country. The rate paid by basic rate income taxpayers rises from 10 – 18% (not much tax is paid at this rate so is largely academic) and the rate applied thereafter, rises from 20 to 24%.
CGT and Fine wine: Exempt assets such as fine wine will continue to provide investors with a valuable option to invest tax efficiently without incurring CGT, subject to personal circumstances.
CGT and Whisky: HMRC considers Whisky in two forms for tax purposes: in cask and in bottle. The Wasting Asset exemption applies to investments in whisky in cask and as such it is treated similarly to fine wine.
Whisky in bottle is viewed as being likely to last beyond 50 years and, as such, any profits made are taxable at the relevant CGT level for that investor. You can find out more about how wine and whisky investments compare in our earlier blog.
CGT and Fortified Wine: Fortified wine, such as port, is viewed by HMRC as having a life beyond 50 years and therefore CGT is chargeable on any gains.
The expert’s view on the Budget and Fine Wine
Put simply, Rachel Reeve’s first Budget does not change the tax treatment of fine wine for investment purposes.
Gains on a portfolio of fine wines will remain out of charge to CGT. For more information see the 2024 Vin-X Tax Report.
Speak to the expert Vin-X team to get information on the current market trends and best performing investment wines on 0203 384 2262.
Peter Owen, Gatwick Enterprise Tax Services Limited