Investing in gold has long been considered a safe haven for preserving wealth and diversifying portfolios. However, when it comes to reaping the benefits of your investment, understanding the tax implications is crucial. One of the key concerns for gold investors is Capital Gains Tax (CGT).
In this guide, we’re here to help you navigate the complexities of CGT and provide strategies to minimise or avoid it altogether, including a smart move to buy CGT-free gold coins from Bullion Giant.
What is Capital Gains Tax (CGT)?
Capital Gains Tax (CGT) is a tax levied on the profit made from selling, giving away or disposing of an asset that has increased in value. This tax applies to a wide range of assets, including property, antiques, stocks, and precious metals like gold. The gain, not the total amount received, is taxed. So, if you bought gold at a lower price and sold it at a higher price, the profit is subject to CGT.
How does Capital Gains Tax work?
Capital Gains Tax is calculated on the difference between the sale price of the asset and its purchase price, known as the “gain”. For example, if you bought gold for £10,000 and sold it for £15,000, your gain is £5,000. This gain is then subject to CGT at the applicable rate.
In the UK, the CGT rates differ based on your income tax bracket. For basic rate taxpayers, CGT is charged at 10%, while higher and additional rate taxpayers face a 20% rate. There are also annual tax-free allowances, which can reduce the amount of CGT owed.
Capital Gains Tax Allowances for 2024/2025
For the 2024/2025 financial year, the annual tax-free allowance for capital gains is £3,000. This means that individuals can make up to £3,000 in capital gains before they are liable to pay any CGT.
If your total gains for the year are below this threshold, you won’t owe any CGT. However, if your gains exceed this allowance, only the amount over £3,000 will be taxed at the applicable rate.
Please note that this limit is reviewed every year and we recommend that investors check with the HMRC for up-to-date information.
Do you pay tax on gold bullion?
Gold bullion, which includes bars and ingots, is typically subject to CGT upon sale. The tax is applied to the gain you make from selling the bullion. Therefore, if you’re looking to make a sound investment in gold bars, it’s important to factor in the potential CGT liability when planning your investment strategy.
If gold prices rise significantly, your gains—and consequently your CGT liability—will also increase. This makes it crucial to consider how fluctuations in gold prices can impact your overall tax burden and investment returns.
How can I avoid paying Capital Gains Tax on gold?
While paying CGT on gold bullion is common, there are strategic ways to legally reduce or avoid this tax. One of the most effective methods is to invest in CGT-free gold coins.
Buy CGT-free gold coins
Certain gold coins are classified as CGT-free investments in the UK. These coins are considered legal tender and are exempt from CGT when sold at a profit. Popular CGT-free gold coins include the British Sovereign and the Britannia coins. Investing in these coins allows you to enjoy the benefits of gold investment without the burden of CGT on your gains.
British Sovereign Coins
The British Sovereign coin is a renowned gold coin. They are not only valuable due to their gold content but also carry historical and numismatic value, which can enhance their appeal to collectors and investors alike.
Britannia Coins
Introduced in 1987, the Britannia coin is available in various denominations, providing flexibility. The Britannia coins are known for their high gold purity and beautiful design, making them a popular choice among gold investors seeking CGT-free options.
Buy smaller gold bars
Buying smaller bars, such as the 1g, 2g, 5g or 10 gram, can also be a smart strategy to avoid paying Capital Gains Tax (CGT) on gold. Here’s why: When you sell smaller amounts of gold at a time, you can keep your gains within the annual tax-free allowance. This way, you can manage your sales to ensure your total gains in any given financial year don’t exceed the CGT threshold. It’s a practical approach that allows you to enjoy the benefits of your gold investment without the extra tax burden. So, by thinking small, you can make a big difference in your overall returns!
Invest in gold coins and bars with Bullion Giant
To ensure you’re investing in authentic CGT-free gold coins, it’s crucial to purchase from a reputable dealer. Here at Bullion Giant, we offer a wide range of CGT-free gold coins at competitive prices. Choose from our range of 1 ounce, half ounce, quarter ounce, tenth ounce and more.
For more experienced investors and collectors, we also provide crafted, heavier gold bars, such as the 500g and 1kg gold bars and our heaviest product – the 12.5kg gold bar. What’s more, all our gold products are LBMA-approved with 99.99% purity and come with FREE insured delivery for added peace of mind. Contact us today to enquire about our collection of gold products. Our team of experts will be on hand to assist you with any queries.
