Speaking as a boring accountant, I’ve never understood why a soft and fairly useless metal is the go-to investment for many, but it does have interesting tax aspects in the UK which we’ll cover.
As with any other investment activity, if you were invested in bullion, or even coins like Krugerrands, then any gain in value of these between buy and sell price is subject to CGT (Capital Gains Tax). As we know already, the UK government has been reducing the tax allowable gain that you can earn and now it’s a miserly £3000 per person per annum (down from a more meaningful £12300 each in 2022/23)
With the CGT annual exemption decreasing (are more reductions on the way?), some investors may look to explore other CGT-efficient assets, to potentially diversify their investments but also benefit from potential tax-free gains – and that’s where bullion coins become attractive. Because UK bullion coins are legal tender, they are CGT exempt!
Bullion coins produced by The Royal Mint are exempt from CGT for UK residents due to their status as legal British currency, as are all silver and platinum bullion coins. Due to their CGT exemption, investors can make an unlimited tax-free gain on all official bullion coins, but remember that as with all investments, prices can decrease so this isn’t the “safe haven” that many would say.
Whilst gold has seen significant increases in recent years, due to conflicts and politicial decisions we assume, there are periods when gold was very stable and also fell in value – we are NOT advising on investments but the adage relating to all investments seem true to the author – it’s a long-term game, and losses are not realised until you sell the investment.
image credit: www.goldprice.org
There are naturally disadvantages to buying bullion coins – there is a premium paid for coins compared to the intrinsic gold value and whether you’re buying Graded (coins which have been assessed and certified by bodies such as the PCGS or NGC, and assigned their rating on the 1-70 scale) compared to the bullion value itself, or ungraded (Loose) coins
What about Value Added Tax (VAT)?
All Royal Mint gold bullion is VAT free for non-VAT registered private individuals. However, silver and platinum bullion, regardless of the country of issue, is subject to VAT at the current rate of 20%.
The history of VAT on gold is interesting - before 1 January 2000, gold sales in the UK were subject to VAT but this changed because of the disparity between rules in the European Union, so the introduction of the exemption meant that for VAT purposes, investment gold would be treated the same as other investments, such as stocks and shares.
So now we’ll look at the dreaded Inheritance tax (IHT), which according to surveys is the most despised tax in the UK.
The current IHT charge is 40% for estates worth more than £325,000, which is combined to £650,000 for a married couple. There is also a further allowance of £175,000 per spouse towards the bequest of the main residence, should the home be passed to children or grandchildren. As gold is simply the storage of wealth, gold is subject to inheritance tax, but it can be bought by your pension fund!
This is a very basic summary of the tax implications of bullion and gold coins; if you want further and more detailed knowledge, let us know by emailing info@riverviewportfolio.co.uk and if the VAT aspects are of further interest, the HMRC guidance is at https://www.gov.uk/guidance/investment-gold-coins-and-vat-notice-70121a.
Share this post: