Art, fine wine and other collectibles as investments

Collectibles like gold and jewellery, art, antiques or fine wine can make interesting investments and might be a good way to diversify – but you need specialist knowledge to get it right, and you might spend a lot on storage, maintenance and insurance.

What are collectible assets?

Warning!

Other collectors’ tastes can change quickly and unpredictably. When you come to sell, your collection might be worth a mint – or be yesterday’s news.

Collectible (or tangible) assets are things you can touch and move, like stamps, antiques or fine wine. They have to be things that are in limited supply, so not something that’s still being made. Their value depends on whether people want them – it’s all down to the taste of other collectors at the time you decide to sell.

Pros of collectibles as investments

  • A possible guard against inflation. Some – although not all - collectibles have matched inflation or increased in real value in the past.
  • A way to diversify. The more types of investment you have the more secure you are, because if one type loses money you still have the others to fall back on. If you mostly invest in financial products, collectibles can be a good backup option.
  • It’s fun. Many people collect things they love – and if you want to make money out of your collectibles that’s probably your best bet. If you’re interested and knowledgeable you’ll make better choices about what to buy.

Cons of collectibles as investments

  • No income. Unlike shares, which might give you dividends, the only way to make money from collectibles is to sell them.
  • Costly to keep. Storing, maintaining and insuring your collectibles can all cost money.
  • Dealers take a cut. When you sell your collectibles you generally use an auction house or dealer which can take a large cut of the sale price. You may end up with less than you originally paid.
  • Prices go up and down. Collectibles only sell if they’re in demand – if people like them, and have enough money to buy them. All this can change quickly and unpredictably.
  • You can make mistakes. Antiques, art and other collectibles are only valuable if they’re genuine, not fakes. You should authenticate anything you buy, but even so it’s possible to make costly mistakes.

Tax rules for collectibles

Capital Gains Tax is due on any gains you make from the sale of collectibles for £6,000 or more. The £6,000 limit applies for both single items and sets, such as a set of chairs or chessmen or case of fine wine. However, the tax is only due after taking into account your Capital Gains Tax allowances. You can deduct things like sale and purchase costs from your profits, but not things like maintenance and storage costs.

If you buy or sell a lot you might be considered a trader rather than an investor for tax purposes. In this case you’ll pay Income Tax, on your profits, not Capital Gains Tax.