How to Buy Tax Free Gold
If you want to make the biggest return on your gold investment, you’re going to want to minimise your expenditure. One of the most significant costs that could hinder on your eventual profits is the amount of tax you pay on your gold, both at the point of purchase and at the point of sale.
Your precious metal will have to rise in value by more than the cost of these taxes before you can start to claim profits from your investment – so it’s important to buy tax free gold where possible.
Luckily gold products are subject to a variety of tax exemptions, meaning that, if you choose your products wisely, you can easily cut some of these costs. There are two main taxes that could affect your gold investment, Value Added Tax (VAT), and Capital Gains Tax (CGT).
Here’s a closer look at how these two tax rates affect the price of gold.
Tax free gold - VAT
VAT is charged on most goods and services. The tax avoids charging on essential everyday items such as milk, bread and tea, though there is inevitably a grey area with some products. Currently, VAT rates in the UK are at 20 per cent (November 2017), having been raised from 17.5 per cent in 2011.
Luckily, across the European Union, an initiative is in place to exempt all gold products that are deemed ‘investment’ or ‘bullion’ gold from VAT. This means that most gold bars and a large number of gold coins are free from VAT.
The government gives the following guidelines on what is considered ‘investment gold’:
- Gold of a purity not less than 995 thousandths that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets.
- A gold coin minted after 1800 that:
- Is of a purity of not less than 900 thousandths
- Is, or has been, legal tender in its country of origin, and
- Is of a description of coin that is normally sold at a price that does not exceed 180 per cent of the open market value of the gold contained in the coin, or
- An investment gold coin as specified in Notice 701/21A Investment gold coins.
In short, this means that most gold products are free from VAT. If you are unsure whether a gold product you are about to buy is subject to VAT, you should check with the trader.
Tax free gold - CGT
Capital Gains Tax – or CGT – is slightly more complex than VAT. Where VAT is charged at the point of purchase for a good or service, CGT is charged at the point of sale. Specifically, CGT is charged on any profits you make from the sale of the item. Therefore, it is neither the price of the gold product on purchase or sale that determines the amount of tax you pay, but instead the amount by which the product has risen in value since you bought it. In effect, this is the sale price minus the purchase price.
There are fewer exemptions to Capital Gains Tax than VAT. There is no blanket exemption for investment gold options, and products are dealt with on a case by case basis.
A certain number of gold coins are exempt from CGT. The coins that are exempt are many of the coins produced by the Royal Mint, as these are considered legal tender in British currency. Since all gold coins made in the UK are produced by the Royal Mint (non-legal tender coins are referred to as ‘rounds’), this means that almost all British gold coins are CGT free.
The main internationally traded British gold coins are the Gold Sovereign and the Gold Britannia, though there are a range of other coins in the Royal Mint’s collection. Both of these coins are also free from VAT.
What are the current CGT rates?
The Capital Gains Tax legislation at the time of writing (November 2017) allows for a personal exemption allowance on all profits up to £11,300. This exemption is not determined by the value of the product, but of the profit you make from it. But remember this is your allowance as an individual on all of your investments, not your allowance per purchase.
So CGT only applies to profits made over the value of the personal exemption allowance. If you make £20,000 worth of profit, you only pay Capital Gains Tax on £8,700 of it.
The government provides the following rates of CGT:
- 10 per cent and 20 per cent for individuals (dependant on the total amount of taxable income).
- 20 per cent for trustees or representatives of a deceased person.
- 10 per cent for those qualifying for Entrepreneur’s Relief.
- 20 per cent for companies.
It is important to remember that tax situations are often complicated, and these tax rates may vary depending on your individual circumstances. You should review the government literature thoroughly before making a purchase or sale that might be affected by these tax rates.
Where can I buy tax free gold?
If buying tax free gold is important to you then take heed of the advice given here and look for products that are not liable for VAT or CGT. We’ve marked these clearly across our website.
But remember that there are other factors to consider as well, such as finding a trustworthy merchant with transparent pricing tied closely to the current gold price and minimum premiums.
Here at The Gold Bullion Company, all our gold products are updated automatically in line with the gold price in order to ensure the maximum value for money for our customers.
Add tax free gold bullion to your investment portfolio today.
