The Chancellor has set out his latest plan to help ease the pains of a ‘no-growth’ economy, sticky inflation, and a high cost of living. Are there any gains for wine investors?
With the understanding that the Office for Budget Responsibility (OBI) downgraded UK economic ‘growth’ to 0.6% in 2023, 0.7% in 2024 and a whopping 1.6% in 2025(!), Jeremy Hunt presented possibly his last Autumn Statement to the House of Commons. Taking full credit for more than halving inflation from 10.1% to 4.6% this year, (don’t worry Mr Bailey, we know you had something to do with it!), the Chancellor set out his stall.
Key headlines from the Autumn Statement
- NI contributions to be reduced from 12% to 10% from 6th January 2024, this 2% saving the average worker £450
- Class 2 NI for the self-employed to be abolished.
- Income tax frozen until 2027.
- State pension triple-lock protected and to rise by 8.5% from April 2024.
- Lifetime pensions to become available providing one pension to pay into throughout your working life, rather than one per company worked in.
- Companies to be able to offset 100% of qualifying capital expenditure against tax imediately.
- Simplification and increased flexibility of the ISA regime.
- Stamp Duty relief on shares to be extended to growth companies and an increase in the market capitalisation threshold from £170M to £450M from 1st January 2024.
- Adjustment to Entrepreneur’s Relief, R&D expenditure and credit and SME schemes from April 2024.
- Alcohol Duty frozen.
Of course, there’s a lot of detail behind the headlines. We should be mindful of the fact that there is no agenda here to address the long-term Government debt issue and the lack of real investment in public services. The OBI has forecast that debt as a proportion of UK GDP will fall to 92.8% by 2029 – oh dear! What we need is a real return to growth. This feels like a ‘sticking plaster’ budget with a general election due in the next year.
What should wine investors be aware of?
It’s important to remember the following:
- Capital Gains Tax – the exemption allowance on CGT was halved in April 2023 from £12,300 to £6,150. It will halve again in April 2024 to £3,000. This applies to the profits made on the sale of shares and other assets, but not fine wine. Some investors will be liable to CGT for the first time and other pay more. Including CGT exempt investments in your investment planning can provide valuable benefits.
- Inheritance Tax – The rumours came to nothing, and The Autumn Statement held no reform on IHT. Fine wine can be used in estate planning and more details on this are available in our Report on Tax and Fine Wine.
- The freeze on Alcohol Duty – A political ‘hot potato’ for the UK Drinks industry over the last year. Duty was raised by 20% in August 2023 and was met with considerable dismay from the drinks, retail and hospitality sectors. Businesses already struggling with the legacy of the pandemic, high inflation, and energy costs, were appalled at the suggestion of a further rise in Duty in this Autumn Budget. The Chancellor listened to the lobbyists and took no further action at this point.
The current UK Duty level is £2.67 per bottle (75cl) of still or sparkling wine. As a percentage of the value of a case of investment wine this really has very little impact. If your wine stays in bonded storage, as an investment wine should to manage quality and be tax-efficient, there is no relevance. Duty and VAT are only triggered when you remove your wine from your In-bond account.
When it comes to the bottle you may enjoy at home or in a restaurant, you could be drinking a significant percentage in Duty and Value Added Tax.
Investing in fine wine is tax-efficient
HMRC classify wine as a ‘Wasting Asset’ and, therefore, any gains from the sale of investment wine are generally exemptfrom CGT. There are other tax advantages of investing in fine wine, and we explain these in our specialist Report on Tax and Fine Wine prepared by an independent tax specialist.
We recommend that our clients, and wine investors generally, take appropriate advice from their tax advisor to ensure they maximise the benefits on offer.
Speak to a member of our expert team to get more detail on the current market conditions and the best wine investment opportunities right now on 0203 384 2262.