Contrary to some press reports, "there isn't and never has been" an inheritance tax (IHT) break on fine wines, says Tax Tips & Advice.
"For tax purposes, the value of any investment, including one in wine, will be the amount you could get if it were sold on the open market." Since cashing your investment in now could make you eligible for capital gains tax (CGT), consider carefully before you act.
The 'wasting asset' rule (under which any growth in value isn't taxed) doesn't apply to most investment wine because it only applies where the wine had an expected life of 50 years from the time you bought it.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So what if wine didn't have an expected total life of 50 years when you bought it, but does now? You could give it to your spouse, as a CGT-free gift. Since they'll acquire it at a point when its expected life is less than 50 years, it'll then qualify as a wasting asset.
Or you could sell it bottle by bottle and use the CGT 'chattel exemption'. This says that where you receive £6,000 or less from the sale of a small good or chattel, there's no CGT to pay.
-
Millions at risk of 'unnecessary' tax bill – how to shield your savingsMillions of Brits could be taxed on their savings interest this year as their savings interest exceeds the personal savings allowance. Are you at risk?
-
Savers will have to wait as long as 48 years to build a £1m cash ISA pot if allowance is cutChancellor Rachel Reeves is rumoured to be planning a cut to the cash ISA allowance in the Autumn Budget, making it harder for savers to build wealth. Will you still be able to build a £1 million cash ISA pot?
