Your estate, or people to whom you have given gifts may have to pay inheritance tax to HMRC after you die if the value of your estate is above a certain amount. It is your executor’s responsibility to ensure your estate pays the correct amount.
Inheritance Tax (IHT) is only due if your estate is worth more than £325,000 (or more than £500,000 if you leave your home to your children or grandchildren).
The standard inheritance tax rate above the zero-tax threshold is 40 per cent. Therefore, your family could wind up paying hundreds of thousands of pounds in tax.
The Seven Year Rule states that no tax is due on any gift that you give, unless the gift forms part of a trust, provided that you do not die within seven years of the gift date.
Legacy Planning and Inheritance Tax Gift Allowance
The state considers investment gold “private,” meaning that unlike cars, property, or financial securities, you don’t need to register them when you transfer them to your children. Therefore, even if your estate will exceed the threshold, you can pass gold bars and coins onto your children without paperwork.
HMRC lets you pass valuables, including gold, onto your children without inheritance tax if you remain alive for seven years after you make the gift. Dying within that time could lead the beneficiaries to pay taxes, though they may do so at a reduced rate under a scheme known as Taper Relief.
Taper relief
| Years between gift and death |
Rate of tax on the gift |
| 3 to 4 years |
32% |
| 4 to 5 years |
24% |
| 5 to 6 years |
16% |
| 6 to 7 years |
8% |
| 7 years |
0% |
You can also gift a total of £3,000 per year (or £6,000 in a single two-year period) of gold to your children under the government’s “gift allowance.”
Additional gifts may be made to a child or grandchild on the occasion of their Marriage or Civil Partnership.
HMRC’s ‘How Inheritance Tax works: thresholds, rules and allowances’ provides more detailed information.
Is Gold Bullion Worth Investing in For Inheritance Purposes?
Gold Bullion bars and coins are recognised as a store of wealth and usually preserve buying power during periods of inflation. Capital Gains Tax exemptions can also make UK precious metal coins worthy inheritances.
Capital Gains Tax and Gold
Investment in Royal Mint gold coins is exempt from Capital Gains Tax (CGT) because the UK authorities consider it a form of legal tender. Therefore, neither you nor your children need to pay CGT on profits, even if they exceed the CGT threshold of £12,300. However, gold and silver bars (and coins from other countries) are subject to CGT. We sell tax-free coins here.
Keep All Your Invoices and Certificates
Invoices show you bought the gold and provide a paper trail for future auditors. They can confirm your gold is legitimate and available for transfer.
You may need invoices when you pass gold onto your children to give them more information about your bullion collection and the provenance of the items.
It also helps if you have manufacturer’s certificates, particularly if you own a large quantity of gold. These documents details your metal’s weight and purity and any serial numbers.
Keep Records of Gifts That You Make
Following your death, the person who deals with your estate will need know what gifts you gave in the past seven years. Keep records of what you gave and to whom you gave it, the value, and the date of the gift.
Store Your Gold Safely
Next, make sure you store your gold safely. Quality gold sellers usually supply silver and gold coins, rounds and bars in plastic containers or manufacturers’ packaging. These protect the malleable metal from damage.
Prepare Your Will
You’ll also want to prepare the division of gold between your children in your will. It could lead to arguments and legal disputes if you don’t.
Many legal professionals recommend that gold owners write a Letter of Wishes to accompany a Will. This non legally binding document can be useful in setting out who will receive what after your death and could help you sidestep the costs of repeatedly re-writing a formal will.
You can also make changes to the will itself, including the name of the executor and the percentages of gold you want to leave to each child.
UK intestacy rules dictate who receives what in the absence of a will. Your estate will either:
- Go to your spouse if he or she is still alive
- Or, be divided equally between your children
(The courts will pass your money on to your next of kin if you don’t have a spouse or children).
However, you may not want to follow intestacy laws. Furthermore, beneficiaries may contest who is entitled to your estate, causing rifts and rivalries in the family.
Therefore, always write a clear Will under the supervision of an experienced family law solicitor. This way, you can avoid family conflict after you’re gone.
Consider Whether Your Life Insurance Policy Is Worthwhile
Lastly, parents saving gold for their children’s future will also need to consider if their life insurance policies are worth the premiums.
Life insurance pays an income or lump sum if you die unexpectedly. Policies that pay to a Trust can help to limit inheritance tax liabilities by ensuring payments directly to beneficiaries rather than via your estate.
However, your family will only get the money if you die within the policy period. Dying outside of the agreed-upon dates voids the policy entirely.
Moreover, life insurance premiums rise as you age (because the risk of death is higher). Costs can become onerous.
Therefore, parents concerned about their children’s financial future might want to divert money spent on insurance premiums to gold instead, particularly if they have adult, independently employed offspring. Gold will always pay out, while many life insurance policies ultimately don’t.
