Capital Gains Tax and precious metals: UK Autumn budget ushers in new era
What is Capital Gains Tax?
Capital Gains Tax (CGT) is the tax applicable to the profit realised on the sale or ‘disposal’ of assets which have increased in value. This applies to assets such as real estate, shares and bullion. CGT is different from income tax in that it only applies to the gain you make from the sale of assets, and not the entire amount you make from the sale. You are not required to pay CGT if your total gains within a financial year fall below the tax-free allowance of £3,000 (applicable to the 2024/25 tax year.) For example, if you bought a painting for £25,000 and sold it for £30,000, CGT would be applicable only on the £2,000 of the profit you made, assuming no other gains from the sale of other assets were made during 2024/2025.
How CGT Applies to Precious Metals
Capital Gains Tax is applicable on the sale of some precious metals, however the good news for bullion investors is that bullion coins minted by the Royal Mint and classed as UK legal tender are exempt from CGT according to HMRC rules. Due to their status as legal currency, Gold Britannias, Sovereigns, and Royal Mint special bullion ranges such as The Queen’s Beasts and Royal Tudor Beasts, are all exempt from Capital Gains Tax. Sharps Pixley also stocks many silver CGT exempt coins which you can explore here. CGT is applicable to all silver bars and gold bars, which is something to consider for investors choosing between bars and coins.
Why Certain Gold and Silver Products are CGT Exempt
In the UK an individual is required to pay Capital Gains Tax on the profit you make from the sale of ‘disposal’ of assets which include:
- Most personal possessions worth £6,000 or more, apart from your car
- Property that is not your main home
- Your main home if you’ve let it out, used it for business or it’s very large
- Shares which are not in an ISA or PEP
- Business assets
However, coins produced by the Royal Mint which are classed as legal tender are not subject to CGT as the Treasury cannot tax the movement of legal currency.
What Changes to CGT Were Made in the UK Government’s Autumn Budget?
While residential property gains will remain at the current rates of 18% and 24%, the government will introduce legislation in Finance Bill 2024-25 to increase the main rates of Capital Gains Tax from 10% and 20% to 18% and 24% for basic and higher-rate taxpayers and is effective immediately on disposals including assets, shares and some bullion investments made on or after the 30th October 2024. In addition, CGT for Business Asset Disposal Relief and Investors’ Relief rate is set to increase to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026. These rate changes made to CGT have reaffirmed gold and silver bullion coins as a popular investment option in the UK.
The Enduring Appeal of Investing in Gold and Silver Bullion
Typically speaking, gold tends to perform well during times of economic uncertainty, such as high inflation and recessionary periods. Gold has delivered positive returns in five out of the last seven recessions, earning it a reputation as a safe haven asset.
Negative geopolitical and macroeconomic forces such as war or recession can send shockwaves through the stock market and trigger downturns in financial investments. Conversely, gold thrives and outperforms financial investments during uncertain times.
Throughout history, gold has shown itself to have a negative correlation with stocks, such as during the 2008-2009 financial crisis in the US and Europe. Therefore investing in gold can provide effective diversification to an investment portfolio. Over the long term, investments made in gold can smooth over portfolio returns and lessen volatility.
In the UK many investors are drawn to CGT-exempt coins thanks to the tax benefits they bring compared to gold ETFs, gold bars and other minted coins which do not benefit from CGT exemptions.
To browse our range of gold CGT exempt coins click here, or for silver CGT exempt coins, here. Alternatively, if you’d like to speak to one of our experts, we’d be delighted to talk through any questions you may have on T: +44(0) 207 871 0532 or by emailing [email protected]
06 Nov 2024 | Categories: Gold, Coins, Bars, Autumn Budget, Capital Gains Tax, UK Gov