No tax on your profit: why whisky is an investment option that’s even easier to swallow

Sam Brooks, Founder of ‘Brooks and Whitaker Ltd’ trading as ‘Vintage Acquisitions’ enjoying a dram in the London office whisky bar.

With no capital gains tax to pay, buying up whisky casks is an option that’s becoming increasingly palatable for many investors.

Fine whisky has seen a huge surge in investment over the past decade as investors turn from poorer-performing traditional options to tangible assets.

And it’s clear there’s an appetite for high-end whisky: last year, one cask of single malt from the Ardbeg distillery on Islay that had been maturing since 1975 fetched a whopping £16m.

Whisky casks present an ideal option for investors looking for long-term gains – and, with a host of associated benefits, purchasing a whisky cask is a decision that’s easy to swallow for many.

No hard sell

Having been trading casks for more than a decade, Vintage Acquisitions are leaders in the field: they buy, sell and broker whisky to market newcomers, whisky enthusiasts and experienced traders alike.

They’ve built direct and indirect relationships with some of the top distilleries north of the border allowing them to source the widest range of quality casks at the best possible prices.

They offer a structured but straightforward approach to your purchase with the promise of no hard sell – just the best advice. They’ll discuss your requirements in terms of price (around £10,000 is the usual entry point) and how long you want to wait, help you choose the right casks and after you’ve received an ownership pack including the certificate of title for your cask, you can sit back and wait for your whisky to mature.

So why does the cask make a difference at all?

“There are lots of different ways that whisky is made but about 80% of its characteristics come from the cask that the spirit held in. The rest comes from the water source, depending what region you’re in, the barley, and the fermentation process,” explains Vintage Acquisitions founder and MD Sam Brooks.

How does it compare to investing in wine?

Sam inspecting casks at Springbank Distillery, Campbeltown, on one of his regular trips to Scotland

“Whisky is a lot more robust than wine,” explains Sam, who certainly knows his grapes: the company first traded in fine wine as well as other rare luxury drinks for private clients when it was founded in September 2011.

“Wine is fantastic, but you are at the mercy of the weather, the time of year grapes were harvested, whether the fruit was particularly ripe or not, and so on. And there is also always the chance that within a case a couple of bottles may be corked; despite having been kept in completely identical conditions at the right humidity, temperature, etc, they can still become oxidised.

“With whisky, it is completely different. With the high alcohol content, whisky doesn’t improve in the bottle as wine does; it doesn’t continue aging in the bottle, but instead does all of its aging, maturing and improving in the cask. And it will never spoil by oxidisation in the cask due to the high percentage of alcohol content – the only thing is, we can’t speed up the maturation process.

“It takes as long as it takes, but that’s the beauty of it as well.”

So how can you purchase whisky casks, and what are the advantages?

Capital gains tax-free

With the exception of ISAs, all investments are subject to capital gains tax at 20 per cent (for property, it's 28 per cent). Each of us has a capital gains tax-free allowance of £12,300 per tax year – but in April, this will be slashed to £6,000, and reduce to just £3,000 from April 2024.

But because whisky is classed as a ‘wasting asset’ (meaning it has a predictable life of 50 years or less), there is no capital gains tax to be paid when it is sold meaning more profit for you.

“As the threshold at which you have to pay capital gains tax gets lower and lower, cask whisky investment is becoming an even more attractive option,” says Sam. “ISAs and Premium Bonds are also free from capital gains tax but they offer poor returns right now – the best rate for ISAs is currently around 4% but when you consider that the rate of inflation was nearly 11% in November then your money is actually devaluing by 7% a year.”

Mitigating inheritance tax

If a husband and wife die, inheritance tax is payable on their estate. The threshold for this is £325,000 – that’s the nil-rate band (or NRB) on which you don’t have to pay – but everything over that amount can be taxed at 40%.

However, if that couple had built a cask portfolio, gifted the casks to their children or grandchildren and then survived seven years, the casks come out of their estate and are therefore exempt from inheritance tax. The technical term for the seven-year rule, which applies to any gift, is a Potentially Exempt Transfer – and there is still less inheritance tax if the client passes away before the seven years is up, thanks to the taper relief.

Other benefits

Your matured cask could make a very special celebration gift – Vintage Acquisitions’ sister firm Vintage Bottlers can even help with the bottling and individual labelling.

Or why not invest now for an incredible gift to a worthy cause in the future to raise funds for charity?

Find out more

If you want to discover more about the benefits of purchasing cask whisky, head to the Vintage Acquisitions website and download your free Whisky Cask Ownership Guide at www.vintageacquisitions.com.

This is paid-for content on behalf of Vintage Acquisitions, and does not necessarily reflect the views or advice of the Yorkshire Post. As with all financial investments, your investment may go down as well as up, and people are recommended to take financial advice.