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Gold and Tax: 3 Things You Need to Know

Published by honor in category Precious Metal Information Guides on 20.11.2023
Gold price (XAU-GBP)
1,848.51 GBP/oz
+ GBP5.81
Silver price (XAG-GBP)
25.14 GBP/oz
+ GBP0.25
tax advantages

Are you concerned about the potential financial liabilities of your investments as the tax year draws to a close? Have you contemplated the benefits of channeling your resources into exempt goods and services?If so, gold might be the answer you’re looking for.

Historically, gold has been a favoured choice for astute investors seeking portfolio diversification. Its intrinsic stability and long-standing value are well-acknowledged. Moreover, when it comes to gold investments in the UK, there’s an added allure due to unique tax advantages and tax exemptions. These benefits are not only substantial but also pivotal for any investor looking to make informed and strategic financial decisions.

3 Things About Gold and Tax That You Need to Know

tax and gold

1. Gold is Not Subject to VAT

The exemption of gold bullion, specifically those sold by The Royal Mint like the Sovereign and Britannia ranges, from Value Added Tax (VAT) in the UK is a significant financial advantage.

Typically, VAT adds around 20% to the price of goods and services, representing a substantial upfront cost for investors. The absence of VAT on gold bullion means that investors can purchase more of this asset for the same amount of money. This is compared to other precious metals like silver and platinum, which are subject to the standard VAT rate.

This makes gold particularly attractive for investors looking to maximise their investment volume without the additional tax burden and tax rates.

Furthermore, the VAT exemption on gold extends to all non-VAT registered private individuals, making it an accessible option for a wide range of investors, from small-scale to large-scale.

2. Gold Made in the UK is CGT Exempt

The exemption of UK-minted bullion coins, such as the Sovereign and Britannia, from Capital Gains Tax (CGT) is a significant benefit for investors.

britannia-1-oz-gold-coin-reverse-2024 In Stock

1oz British Britannia Gold Coin 2024

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CGT is charged on the profit realised from selling an investment. The fact that these specific gold coins are considered legal tender and thus exempt from CGT can greatly increase the net profitability of an investment in gold. This is especially important given the recent reductions in the CGT annual exemption limit, which have reduced the amount of profit that can be realised without incurring CGT.

Therefore, investing in these specific gold coins can be a strategically sound decision for those looking to optimise their tax efficiency. This is particularly important for long-term investments where significant appreciation in value is anticipated.

3. Gold’s Exemption from Inheritance Tax

While gold is subject to Inheritance Tax (IHT), it still plays a pivotal role in wealth preservation and inheritance planning.

IHT is typically charged at 40% on estates over £325,000 in value, which can significantly reduce the amount of wealth passed on to heirs. Gold, however, offers a unique opportunity in this context. As a tangible asset, it can be incorporated into various investment vehicles, such as pensions, which may offer tax benefits or exemptions.

This strategic use of gold in financial planning can be instrumental in reducing the IHT liability, thereby allowing for more efficient transfer of wealth to subsequent generations.

Moreover, gold’s enduring value and stability make it an attractive asset for inclusion in an estate, especially in times of economic uncertainty, where its value often remains stable or increases.

Why This Makes Gold an Interesting and Promising Investment

gold good investment

Gold’s appeal as an investment is enhanced by its unique tax benefits in the UK, making it a smart choice for both short and long-term investors:

  • Hedge Against Economic Uncertainty: Gold is a reliable safe haven during economic instability, often increasing in value when other assets like stocks and currencies falter. This makes it an excellent tool for diversifying portfolios.
  • Tax Advantages: In the UK, gold investments are exempt from Value Added Tax (VAT) and UK-minted gold coins are free from Capital Gains Tax (CGT), boosting their profitability and appeal.
  • Wealth Preservation: Gold is a tangible asset used in inheritance tax planning, aiding in the efficient transfer of wealth across generations. Its incorporation into investment vehicles can also minimise Inheritance Tax liabilities.
  • Global Liquidity and Acceptance: Gold is easily tradable worldwide, maintaining its value internationally, which is beneficial in a global economy.
  • Emotional and Cultural Significance: Beyond its financial value, gold holds emotional and cultural importance, often symbolising security and prosperity in various traditions and life events.
Great Britain Sovereign King Charles III Coronation In Stock

Great Britain Sovereign King Charles III Coronation

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Key Takeaways

In summary, gold’s unique position, exempt from both VAT and CGT, enhances its appeal as a stable investment in the UK. The exemption of VAT on gold bullion, among certain products, and the CGT exemption for UK-minted coins, increase its profitability and accessibility.

Notably, for those in the higher rate tax brackets, gold offers a tax-free avenue for wealth accumulation. It also plays a strategic role in inheritance tax planning, particularly beneficial for a spouse or civil partner, aiding in the preservation and transfer of wealth.

Gold stands out as a safe haven amid economic fluctuations, offering financial services that extend beyond the annual exempt amount and taxable income considerations. Charging VAT on goods doesn’t apply to gold, offering a partial exemption advantage.

This, coupled with gold’s cultural significance, makes it a compelling choice for investors seeking diversification and reduced rate tax liabilities.

Understanding these tax rates, data freedom of information releases, and corporate reports on gold investment are crucial for leveraging its full potential in diverse investment strategies.

Gold price (XAU-GBP)
1,848.51 GBP/oz
+ GBP5.81
Silver price (XAG-GBP)
25.14 GBP/oz
+ GBP0.25

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