A wine bond is a secure, government-approved facility where wine can be stored before UK Alcohol Duty and VAT have been paid. Wine held in this way is described as wine in bond, which has become an increasingly popular route for collectors and investors to securely store wine and suspend tax duties.
When wine is purchased in bond, ownership transfers immediately, but the bottles stay exactly where they are, in the bonded warehouse, until duty and VAT are settled. For UK buyers, the tax position of wine in bond is decided by what an investor chooses to do next. Drinking the wine, gifting it, selling it or holding it as part of a long-term investment, each has significantly different tax outcomes.
This article explains how buying wine in bond works, the duties and VAT that apply to wine in the UK, and the tax and other benefits of buying wine in bond. We will also explore what happens when wine in bond is eventually sold or transferred from storage, with tax rules varying significantly depending on an individual’s circumstances. For tailored guidance on wine in bond or your personal tax position, speak to a member of our Personal Tax Advice team today.
Table of Contents
Buying Wine in Bond: How does it work?
UK Taxes and Duties on Imported Wine
Two charges apply to wine sold in the UK: Alcohol Duty and VAT. These taxes usually apply when wine reaches a UK consumer and are not immediately payable on wine held in bonded storage.
UK Alcohol Duty on Wine
Alcohol Duty is an excise duty charge based on the alcohol content of the wine. The higher the ABV, the greater the duty charged. This follows alcohol duty reforms introduced in August 2023, in which UK duty rates are calculated on wine ABV rather than a single flat rate per bottle. These rates are as follows:
| Alcohol by volume (ABV) | Amount of duty in £ (pounds) for each litre of pure alcohol in the product |
|---|---|
| 0 to 1.2% | £0.00 |
| 1.3% to 3.4% | £9.96 |
| 3.5% to 8.4% | £26.61 |
| 8.5% to 22% | £30.62 |
| Stronger than 22% | £33.99 |
The above rates are set by HMRC’s Alcohol Duty rates, and are subject to regular review and change.
For example, a 75cl bottle of wine at 12.5% ABV contains 0.09375 litres of pure alcohol. This produces a duty of £2.87 before VAT is considered (£30.62 x 0.09375 = £2.87).
UK VAT on Wine
VAT (Value Added Tax) is charged after excise duty has been applied to wine and is set at 20% of the sale price. Everyday purchases of wine outside wine in bond will usually already include both VAT and duty in the total sale price.
For example, a 75cl bottle of wine at 12.5% ABV purchased for £30 at retail will include £6 VAT and £2.87 of duty within its price.
Imported Wine Held in Storage
Where wine is imported, moved between countries or held in storage before reaching the end buyer, the VAT and duty position can change. Instead of paying VAT and duty upfront, these charges can be suspended while the wine is held in an HMRC-approved bonded warehouse, becoming due only when the wine is released for consumption.
Buying Wine in Bond
Buying wine in bond means buying wine that is held in an HMRC-approved bonded warehouse, where Alcohol Duty and VAT have not yet been paid. Ownership of the wine passes to the buyer immediately, but the bottles remain in storage.
Wine in bond is usually sold by the case, although it can also be bought en primeur or as individual bottles. En primeur is a popular route for buying wine in bond, where wine is sold while it is still maturing in barrel, before it is bottled. Buyers commit to a purchase based on early tastings, critic scores and the reputation of the producer. The wine usually arrives in bond at a later date, around eighteen months to two years later, once it has been bottled. This can provide an opportunity to invest in wine at an early stage of the process, with the hope that its value may increase as it matures. Buying wine in bond en primeur does not guarantee that prices will rise, and it is important to take specialist advice to support your investment in wine bought at an early stage.
Process of Buying Wine in Bond
The process of buying wine in bond is usually managed through a wine merchant, broker or specialist platform. The buyer selects the wine, agrees on the in-bond price and completes the purchase without paying UK Alcohol Duty or VAT at that stage.
Once purchased, the wine remains in an HMRC-approved bonded warehouse. Ownership should pass to the buyer, but the storage arrangement can vary depending on the merchant. In some cases, the wine may be held in the buyer’s own private account with the bonded warehouse. In other cases, it may be held under the merchant’s account on the buyer’s behalf.
If you are interested in starting a wine collection or considering wine as an investment opportunity, do your due diligence and choose a well-established wine merchant. It is also worth checking whether the storage side of the business is set up as a separate entity, which can offer additional protection for your wine if anything were to happen to the merchant.
Your wine merchant can advise on the practicalities of buying and selling wine in bond, including broking fees, storage arrangements and investment guidance.
Benefits of Buying Wine in Bond
Tax Benefits of Buying Wine in Bond
The main tax benefit of buying wine in bond is the deferral of duty and VAT. In some cases, it may also mean that you do not personally pay UK Alcohol Duty or VAT, provided the wine is sold while it remains in bond. This usually means the in-bond purchase price is lower than the duty-paid retail price, which can make larger purchases more affordable.
If the wine is later removed from bond for personal consumption, Alcohol Duty and VAT become payable at the time of removal. The amount due is based on the rates and rules in force at the time of removal, but calculated on the original purchase price of the wine.
One thing clients often underestimate is the difference it makes when wine has appreciated significantly over ten or fifteen years. If it’s eventually taken out of bond, the VAT and duty are calculated on what was originally paid, not what the wine is worth now. That’s why accurate record-keeping from day one matters so much
One thing clients often underestimate is the difference it makes when wine has appreciated significantly over ten or fifteen years. If it’s eventually taken out of bond, the VAT and duty are calculated on what was originally paid, not what the wine is worth now. That’s why accurate record-keeping from day one matters so much.
Angus Barcroft
Private Client Sales
Lea & Sandeman
If the wine is sold while it remains in bond, ownership can usually pass to the new buyer within the bonded system. In that case, UK Alcohol Duty and VAT do not usually become payable by the seller, because the wine has not left the duty-suspended environment.
This can benefit both collectors and investors. Collectors may be able to buy wine at a lower upfront cost and keep it professionally stored until it is ready to drink. Investors may benefit from preserving cash flow and, where the wine is sold in bond, avoiding a personal duty and VAT charge on the sale.
However, wine in bond is not automatically tax-free. The main benefit is the delayed point at which duty and VAT become payable. It is important for investors to carefully plan how purchases, storage, removal and the sale of their wine is structured.
If you are planning to purchase wine in bond or deciding whether to remove or sell an existing bonded collection, it is worth discussing the VAT and duty position with an adviser. DS Burge & Co’s Personal Tax Advice team can help you understand how the rules apply to your circumstances.
Other Benefits of Buying Wine in Bond
Buying wine in bond can appeal to both collectors and investors who want to own fine wine while keeping it professionally stored and in optimal conditions. Although the tax benefits are often the main attraction, several practical advantages can be just as important.
These include:
- Optimal storage conditions: Bonded warehouses are designed to store wine in temperature and humidity-controlled conditions, helping the wine age correctly over the long term.
- Insurance and security: Wine held in professional storage is usually kept in secure facilities, with insurance often available or included as part of the warehouse arrangement.
- Easier resale: Wine that has remained in bond with a reputable merchant or bonded warehouse can be more attractive to collectors, brokers and prospective buyers.
How is Wine taxed when it is sold?
Capital Gains Tax
The HMRC Capital Gains Manual defines bottled wine as a chattel with potential application for wasting asset exemption. This means the item is referred to as movable property, where the asset has a tangible life of less than fifty years. In turn, they are exempt from Capital Gains Tax (CGT) on their disposal.
However, while the majority of fine wines fall within HMRC’s scope for no CGT, numerous fortified wines with a predicted storage life of more than fifty years might be applicable for CGT. It is therefore important to establish the type of wine, its expected useful life and the facts of ownership when selling your investments.
Chattels Exemption
Where wine falls outside the wasting asset exemption, the chattels exemption may still apply. Bottled wines are classed as chattels (tangible movable property) by HMRC. Where disposal proceeds are £6,000 or less, the sale is exempt from CGT.
If multiple bottles are sold to the same buyer, they may be treated as a set rather than individual disposals. HMRC considers this on the facts of the case, including whether the bottles are produced from the same vineyard in the same vintage year, and whether they are worth more when they are sold collectively than individually. Where bottles are treated as a set, the £6,000 threshold applies to the set as a whole rather than to each bottle.
Trading
The tax position can change if buying and selling wine becomes frequent, organised and profit-driven. There is a difference between a private collector occasionally selling a case, a casual investor selling from time to time, and someone buying and selling wine in a way that resembles a trade.
If HMRC considers the activity to be trading, profits may be taxed as income rather than under the CGT rules. This depends on the overall facts, including frequency, organisation, intention and how the sales are carried out.
Inheritance Tax
Wine does form part of a person’s estate for Inheritance Tax purposes, whether it is held at home or in bond. A valuable wine collection would usually need to be included at market value if owned at death.
Good records and provenance are important, including purchase documents, ownership details, storage location and estimated value. There is no automatic IHT exemption simply because wine is held in bond or because duty and VAT have not yet been paid.
For significant collections, we provide inheritance tax advice to help with estate planning, to ensure the wine is properly valued, recorded and considered as part of the wider estate.
Conclusion
Buying wine in bond can be an attractive option for collectors and investors, particularly where the wine is being held for the long term or stored with future in-bond resale in mind. It allows wine to be kept in professional bonded storage, with UK Alcohol Duty and VAT deferred until the wine is removed from bonded storage.
The tax treatment of wine in bond is largely driven by what happens to the wine after purchase. Wine that is held for personal consumption, sold in bond or gifted, each has varying tax outcomes.
If you are considering buying wine in bond, already hold a bonded wine collection, or want to understand the CGT, IHT or personal tax implications of wine you own, speak to a member of our Personal Tax Advice team today to talk through your circumstances.