The tax that is applied on the profit you make by selling, giving away or disposing of something is known as Capital Gains Tax or CGT. Assets owned by you, such as property, shares or gold and silver bars (bullion) can be subject to CGT. Your CGT bill could be brought down with the help of a tax-free allowance and other reliefs. Bullion investors usually will never need to pay this tax owing to the amount and worth of their investment. Yet, investors should know enough to make an educated guess of their position.
Are you liable to pay Capital Gains Tax on gold bullion?
An investor has to pay Capital Gains Tax only if her/his profit is over £11,000 in one financial year. You should be aware that the £11,000 limit is solely the profit made from your original spending, not the sum value of selling your gold coins/bars. For instance, if an investor purchased some gold in 2014 for £30,000 and sold it in 2015 for £41,000, it won’t be taxable as only the £11,000 profit made is taken into account. Yet, this single transaction would make up for the year’s complete tax-free allowance for the investor and any added gain made would be taxed at a rate between 18 to 28 per cent. It is important to remember that the tax-free limit amount is only set for a particular financial year and is re-examined every year. The payable tax rate varies from 18 per cent to 28 per cent – you can visit the HM Revenue & Customs (HMRC) website (https://www.gov.uk/capital-gains-tax) to find the accurate rate, and for further details.
How Capital Gains Tax on gold can be avoided
The easiest way to keep off CGT on gold in the UK is by selling gold bullion in smaller amounts. Provided that your gold bullion is sold for a profit that is below the limit set for that financial year, you do not have to pay any CGT.
To avoid paying CGT or decrease the scope of tax deduction as much as possible while selling, many investors prefer investing in gold coins of smaller unit, or smaller bars. CGT can be kept off or lowered by selling portions of the bullion over a period of more than one fiscal year. For instance, if an investor had gold coins worth £50,000 in 2011, which in 2013 went on to gain a value of £70,000, rather than taking in the full £20,000 profit at once, the investor could sell 50 per cent of the coins in 2013, for a tax-free profit of £11,000, and the rest of the gold coins could be sold in the next financial year. Still, one must not forget that the price of gold keeps changing so the rest of the gold coins could have a lesser or greater value in another financial year. It is unlikely that such a problem could rise when realising the worth of silver because there are significantly lesser unit prices related to silver coins and bars.
Purchase British gold coins: Although British gold coins draw a somewhat higher return than krugerrands, it would be wise for UK investors to purchase lower-unit gold sovereigns and half sovereigns, and gold Britannia coins for greater 1 oz units. Both British gold coins are free from Capital Gains Tax and offer the best relief for investors.
Keeping in mind the prosperous gold investors, for anyone intending to invest a significant amount of money on gold, sovereigns and the gold Britannia coin are the ideal choice. An example here emphasises the possible advantages of purchasing British gold coins. An investment of £50,000 in September 2012 would gain a value of over £150,000 in November 2016. If this gold investment was made in any other form rather than British gold coins, the profit would be subject to Capital Gains Tax. Consequently, a CGT paying individual willing to make the most of this investment would be able to save up to £28,000 on taxes. Clearly, if the gold price continued to rise and the investor decided to keep her/his gold, she/he could save even more on taxes.
Gold coins free from Capital Gains Tax
All British legal currencies such as gold and silver Britannia coins and post-1837 gold sovereign coins, including proof sets, are exempt from Capital Gains Tax. This means there is no limit on the tax-free profit that you make on investments of any value and quantity of all these British legal currency bullion coins. This is why these coins are popular with customers. All other gold and silver coins/bars which do not belong to this category are taxable.
Generally, owing to the bulk and worth of their investment, investors in gold or silver bullion need not be bothered about CGT. However, if you are intending to invest a sizeable amount in gold, then investing in gold sovereigns or Britannia coins is the best possible option for you. These coins allow you the choice to invest and sell according to your specific need in terms of quantity as well as time because they are exempt from any Capital Gains Tax.
How good an investment is silver?
Although both gold and silver are expensive metals, they are actually very different as investment commodities. Conventionally, gold attracts investors seeking the maximum guarantee and security for their wealth in times of economic uncertainty. In contrast, silver is far more risky and uncertain, and at the same time, can bring significant gains in spite of the basic VAT spending.
The value of silver is determined by commercial as well as investment demand, making its price movements more inconsistent. Hence, silver is often seen as a more unstable commodity. Consequently, only those who are willing to take risks invest in silver. Many gold investors opt to expand their gold investment with silver, a good way to understand the possible advantages of the rapid rise in prices. Here we discuss some of the reasons why you should own silver.
Silver a perfect way to expand your scope of investment
Possession of physical silver bars and silver coins is often seen as a perfect way of adding to the scope and variety of your investment. The purpose of such diversification is that if some parts of your portfolio go through depression, then other parts can recover your losses, therefore neutralising or at least alleviating the setback of a portfolio collapse. Valuable metals also work like a cushion, providing a low negative connection with other assets such as bonds or stocks, suggesting that the presence of even a small amount of these metals in your portfolio will clearly reduce risk.
Silver underrated, risky investment
The gold to silver ratio (GSR) determines the number of ounces of silver needed to purchase a single ounce of gold. In the past, the GSR has fallen to as low as 14 and has an average of 47. These days barely over 70 ounces of silver can be purchased in lieu of 1 ounce of gold. This implies that at present silver is greatly under-performing gold, implying a possible strong advantage if the ratio is to come back towards its past average.
Future of silver looks positive
Owing to its increasing requirement in modern industrial applications and also for various medical purposes and many nanotechnology applications, the price of silver remains very susceptible to changes in the business environment. Therefore, future demand for silver looks encouraging, potentially promoting its value.
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