The yellow metal has been on a tear for years. Gold bugs and survivalists – not to mention passive investors with well-diversified portfolios [1] – sitting on big gains might well now be wondering how gold is taxed.
It isn’t always thus. Sometimes gold is in the doldrums.
For example, the gold price also soared after the Global Financial Crisis. By the peak in 2011 it seemed as if paranoid people with bars of bullion buried in their back gardens might really inherit the Earth.
This was the culmination of a tremendous bull run that saw the gold price multiply five-fold from the late 1990s.
And so – ever quick to jump on a bandwagon – Monevator explained how gold is taxed in the first version of this article in… December 2015.
Oops! By then gold had slumped. The price was down more than 40% from its post-GFC highs.
Remember: investing is cyclical [2]. With knobs on, as my old man [3] used to say.
Golden years
Happily for my never-ending quest for bragging rights over my co-blogger, in my 2015 article I wrote:
…call me a contrarian but I’m much more interested in owning gold now it seems about as relevant as fairy tale treasure from The Hobbit, compared to when the price made the nightly news.
Not very much gold, mind.
I’m thinking I’d like 2-5% of my portfolio in gold. For insurance and diversification for the long-term.
Happily, the gold price has nearly tripled for UK investors since those dull December days of late 2015:
[4]
Source: Gold.co.uk [5]
Less happily, I’ve typically owned closer to the 2% end of my allocation range.
Still, better than a kick in the teeth, as my old dad also used to say. (And which sounds pretty ominous, typed out like that!)
Fool’s gold
The point is capital gains tax [6] (CGT) on gold could now be a very real issue if you bought and held gold from the lows and you want to sell.
Painful, too, given today’s much lower CGT allowances.
To quote one last time from my article of nine years ago:
Because of how tax reduces [7] your investment returns, I’m looking for the best way to invest in gold to avoid [8] a massive tax bill in the future.
If you were a buyer then I hope you did so too.
Let’s recap.
Tax on gold gains
How gold is taxed isn’t a simple matter. There are always quirks with taxes.
Indeed with the UK tax code clocking in at over 21,000 pages [9], you could argue the whole system is one enormous quirk.
And how gold is taxed can be as confusing as everything else tax-related.
The specific tax on gold gains you’ll pay depends on:
- What form of gold you own
- Whether you have it in an ISA or a SIPP – or even under your mattress
No income tax, no VAT
What kind of taxes on gold are we talking about?
The good news for all you budding oligarchs is there’s still no wealth tax in the UK payable for just owning gold.
Fill your boots! Then put your boots in a safety deposit box. You’ll not be taxed just for hanging on to your gold.
There’s also no income tax to pay on gold.
Of course that’s because gold pays no income. Which is one of its most unattractive traits from an investment point of view. Though hardly a shocker from a Laws of Physics perspective.
Gold isn’t a productive asset like a farm or a piece of machinery. It’s just a lump of metal.
If you own shares in a gold miner then it might pay a dividend. Assuming it’s one of the few not intent on squandering every last dollar on discovering harder to process deposits miles beneath the Earth’s crust.
Lucky enough to get a dividend? It will be taxed like dividends [10] from any other company.
Finally, there’s no VAT to pay when you buy gold bullion or gold coins for investment purposes. So no worries there, either. (Well, almost. See below.)
Weirdly, VAT is payable on purchases of silver at the standard 20% rate. Perhaps the gold conspiracy theorists are onto something?
Capital gains tax and gold
So far so good. But there’s one flavour of UK taxes you’re very likely to face with gold: Capital Gains Tax [6].
I’m going to assume you understand the basics of CGT. If you don’t, please go and read our quick primer [6] and then come back ready to roll with the rest of us high-flyers…
*twiddles fingers*
Done that? Great!
So now we all know that CGT is a tax levied on the gains you make when you ‘dispose’ of – usually by selling – certain investments.
And that includes – in some forms – gold.
“Some forms” I say?
Yes – because not all gold is taxed equally.
Quirks, remember?
In particular certain gold coins are considered legal tender in the UK. Being legal tender makes them free of CGT.
Look for coins produced from the Royal Mint that qualify as legal tender.
According to The Royal Mint [11]:
…all gold, silver and platinum bullion coins produced by The Royal Mint are classed as CGT-free investments.
This includes gold and silver Britannia coins, Sovereigns and the popular Queen’s Beasts range.
British gold sovereigns are typically recommended because they can be appealing to collectors as well as for their gold content. This means there’s two ways in which your gold investment can hold or increase in value when you buy coins.
Note it’s the legal tender aspect that makes these coins exempt from CGT. Not their size or handiness.
Beware this VAT trap
If a coin is bought as an investment in gold bullion, then it should normally be exempt from VAT.
However if a coin is sold for more than 180% of its gold-value content, then it may be judged as attractive as a collector’s item – and so become subject to VAT.
According to HMRC [12]:
It does not matter that an individual coin is of special interest to collectors, if the usual price of the coin type falls within 180% of the value of the gold contained therein, all coins of that type will be exempt.
If a coin type is usually valued at more than 180% of the gold value, because of its interest to collectors, but an individual coin is in such poor condition that it is worth less than 180% of its gold value, that coin (like others of its type) will be subject to VAT at the standard rate.
Confused? I am a bit. If you’re into numismatics – that’s the study of coins, currencies, and other payment methods – then you’ll need to do more research to see if VAT is payable on your kookie coins.
For similar reasons, don’t invest in gold via gold clocks or wedding rings (the latter for all kinds of reasons…) as you’d be potentially liable for VAT when you buy and for CGT [13] when you sell.
But if you’re simply buying British gold sovereigns to stash somewhere safe then you’re all good.
ISAs and SIPPs and gold
Aside from coins, your best bet for sidestepping CGT on gold is to hold your gold in an ISA or a SIPP1 [14].
But this is where it gets tricky. That’s because some ways of investing in gold that are attractive from one perspective are not so appealing – or even possible – from another.
For instance, some people want to own real physical gold, not so-called ‘paper gold’ like a gold ETF. (Or an ETC [15], or Exchange Traded Commodity).
They often want physical gold specifically because they are hedging against disruption or disorder to the financial system. A notional ETF holding in an online nominee broker account is presumed to be less useful than a bit of shiny metal in your hand if we head back to the Stone Age.
However unless you own a private fort to fill with British sovereigns, buying physical gold in size will probably mean using a gold platform like BullionVault [16] or The Royal Mint2 [17]. Like this your gold is stored in a vault somewhere safe – say under the Swiss Alps.
Such gold bullion is liable for CGT. It also can’t be held in an ISA.
In contrast, gold ETFs like the iShares Physical Gold ETF [18] can be bought and sold in your ISA [19]. This makes it easy to gain exposure to the gold price while shielding your investment from tax – so long as you don’t mind using an ETF.
Perks of a pension
Just to further confuse matters, some of the physical gold platforms do enable you to hold gold in a SIPP, depending on your provider.
BullionVault [16], for instance, works with several SIPP platforms.
It notes that buying gold through your pension could mean the government pays up to 45% of the cost of your gold, thanks to tax relief.
Doubtless that’s extra appealing to a certain kind of gold fan.
Golden summary
You’ll need to think about how to use your own tax shelters [20] to protect your personal gold hoard from the taxman.
But here’s a handy table of how gold is taxed:
| Type of gold | CGT? | ISA-ble? | SIPP-able? |
| Gold coins (UK currency) | No | No | No |
| Gold coins (not UK currency) | Yes | No | No |
| Gold bars (owned outright) | Yes | No | See below |
| Gold (owned via a platform) | Yes | No | Yes |
| Gold ETFs/ETCs | Yes | Yes | Yes |
| Gold jewelery | Yes | No | No |
| Gold teeth* | Oo aar! | Oo aar! | Oo aar! |
*If you want to try to tax a pirate (or a gangsta rapper) on their bling dental work, be my guest.
Golden rules of thumb
I’d suggest these solutions best fit various use cases:
- Owning a modest amount of gold outside of ISAs and SIPPs – investing via UK gold coins that are legal tender is best. You can buy CGT-exempt sovereigns from The Royal Mint. If you store within the Mint’s own ‘Vault’ then it can buy them back later. See its FAQ [21].
- Gold in an ISA – low-cost gold ETFs [15] / ETCs are best.
- Gold in a pension – gold ETFs / ETCs again, or you could consider one of the qualifying gold bullion providers who partner with UK pension schemes. I’ve held some gold with BullionVault [16] for over a decade. The Royal Mint is again another option.
- Owning entire gold bars like a bond villain – you’ll want direct ownership with storage in a suitable fortified bank, or else to own a certain monetary value of real physical gold with the likes of BullionVault… But again remember you will be taxed on capital gains with this option, unless you use a SIPP.
Unless you are one of our central banker readers, option four doesn’t look very relevant to most of us. But the other three options give us a variety of ways to invest in gold tax-free.
Golden advice
Please note I’m far from the pub bore on gold. Also I’ve never held gold in a pension scheme. (I read up on it for this article.)
Do your own research and take professional advice if needed. Avoid putting money into a dodgy scheme, or investing your pension into something that ultimately hits you with a tax bill.
On the other hand, if you’re an expert on the minutia of investing in gold, then hands-on tips in the comments below would be appreciated.
(Note: Financial conspiracy theories or advice on getting out of fiat money before the great riots of 2033 are not really our thing on Monevator, thanks.)
Watch out for costs with gold
Finally do remember that while taxes can severely reduce your returns [7], so can plenty of other things.
In the case of gold, that could include high dealing costs, ongoing storage costs, insurance [22] fees, and even theft.
Oh, and the risk you might decide to sell all your equities and even your house to buy yet more gold because you think Britain is going bankrupt. (People can go crazy [23] about gold.)
Creeping costs
As usual, it’s over longer time periods that the smaller charges add up.
Let’s say storing gold coins costs you 1% a year versus 0.25% in annual costs for a gold ETF.
Let’s also suppose the gold price delivers an annualised 5% a year gain over the next 20 years.
You decide to split your £20,000 investment in gold between gold coins and a gold ETF in an ISA, like any good risk-averse investor.
After two decades:
- The £10,000 in gold coins is worth £21,911
- The £10,000 in a gold ETF has grown to £25,298
Quite a difference! Enough to eat into a chunk of the CGT savings you’d get from going down the coin route compared to the ISA-and-ETF option.
To be sure this is a simplistic example. The figures are all illustrative. And in reality the costs for storing gold coins probably wouldn’t compound at the same rate as the price of gold.
(Also you can’t ‘clip’ gold coins to pay your fees, so those fees might have to be paid from money from outside of your gold hoard. That could alter the maths).
But you get the picture.
Also, individual circumstances will vary.
If you’re a paid-up member of the 1% then you might already have your own liveried security vault somewhere deep below Mayfair. If you do then by all means squeeze a few bars of gold into the space behind Aunt Agatha’s tortoiseshell sideboard and cut your costs.
Equally, if you’re a daredevil risk-taker happy to hide your gold coins in a biscuit tin beneath your aquarium, then you can escape storage costs altogether. Few would recommend it though.
Costly trade-offs
Note that trading costs are chunky for some forms of physical gold investment.
That’s because – unsurprisingly – people who buy gold want to know it’s really gold, not just foiled-covered chocolate coins.
It costs money to get gold verified3 [24] which means higher turnover costs.
Alternatively you can keep gold in a so-called accredited facility, some of which I’ve cited above. This way the gold never moves, so its authentic status remains intact. But then we’re back to higher storage costs.
Gold and tax: the takeaway
Think about how gold is taxed, how long you intend to hold it, and in what circumstances you’d want to get at it.
That way you can best decide on the most tax-efficient investment method for you.
Perhaps the best thing to do, as usual, is to diversify your gold across a range of different forms and platforms – particularly if you’ve got a large portfolio to manage. Not least because tax rules can change.
You might own some British sovereigns stored at your local secure bank or with The Royal Mint, a gold ETF in your ISA, and perhaps a dollop of gold bullion in your SIPP via the likes of Bullion Vault [16].
That’s how I will continue to build my own gold hoard – though I’m in no rush!
Note: This article is about how gold is taxed. It’s not about how politicians could confiscate it all if they wanted to. Or how ETFs are as bad as shares compared to a solid coin in your hand. Nor about how anyone who doesn’t swap everything for gold is going to die a pauper, nor about Bitcoin, nor about how Warren Buffett thinks you’re an idiot if you buy one ounce of gold. Please keep comments on-topic. Again, the BullionVault links are affiliate links. I may get a small bonus from any new signers – but it doesn’t cost you anything. It’s just a marketing cost to them. Hoard safely now!