How Capital Gain Tax (CGT) works on gold bullion?
At Gerrards (Precious Metals) Ltd, we are not accountant, tax experts or financial advisors. However, we will give you the benefit of our knowledge acquired over the years. If you believe you are subject to Capital Gain Tax on gold bullion that you have purchased, please take professional advice from a tax adviser.
You will find below some informations related to the taxes applied to gold and silver investment.
What is Capital Gain Tax ?
“a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It is the gain you make that is taxed, not the amount of money you will receive.”
CGT is applicable to a wide range of assets, such as property, antiques, stocks, and investment gold bullion. Every individual has an annual personal Capital Gain Tax allowance. Any gains released in a single financial year will go towards your CGT allowance. Profit below the allowance limit are exempt from CGT whilst gains over your allowance will be subject to tax in line with HMRC rates.
More infos about CGT on
How does CGT work for Gold Investment ?
CGT will be the amount of tax you will have to pay at resale over the profit when you sell your gold investment.
In most cases, this tax does not apply for most gold investors, because of the investment size. In fact, many small investors may never reach the Capital Gain Tax threshold. However, keep in mind that it is your overall gains that are taken into consideration, not only bullions. This can include the profit from sale of property, shares, lands or antiques.
As a gold investor, you will have to pay CGT if you realises over £11,700 of profit in one financial year. This limit is purely for the profit made from your digital outlay. Let’s illustrate with an example:
It is the responsability of the individual investor and not the bullion dealer to declare any Capital Gain Tax payable. We advise again that you speak to a professional accountant in furter detail to ensure your personal financial situation is in working order.
Example 1:
You bought £30,000 in physical gold in 2013. You sell it today for £40,000.
40,000 - 30,000 = £10,000 profit
You will not have to pay Capital Gain Tax since your profit is under the £11,700 limit.
Example 2:
You bought £30,000 in physical gold in 2013. You sell it today for £40,000.
You bought £9,000 of Apple Shares in 2016. You sell it today for £10,000.
(40,000 - 30,000) + (10,000 - 9,000) = £1,000 profit
11,700 - 12,000 = £300 of taxable profit.
You will have to pay Capital Gain Tax only on the profit over the £11,700 limit.
What is the percentage (%) of CGT that I will pay?
The Capital Gain Tax rate that you will pay varies. According to HMRC website:
- If you are within the basic Income Tax band, you’ll pay 10% of CGT on your gains.
- If you are within the higher Income Tax band (also called higher rate tax payer), you will be charged 20% of CGT
More infos from the HM Revenue & Custom Website below:
How to minimize CGT on gold when re-selling?
If you are a UK investor, consider to buy CGT Free gold bullions (gold sovereigns or gold britannias). There will be no tax applied if you decide to sell these products. This will not be the case for other gold coins or gold bars.
Otherwise for gold bars and gold coins, you can minimize CGT as follow:
- When you sell or dispose of your coins ensure the profit you make falls within your yearly allowance. If you know you are going to fall into this bracket, as previously advised, take advantage of lower premium products.
- Think about part selling, for example, sell a portion of your investment in one financial year and a portion in another year.
- If you make a loss on the sale of assets this can be set against any gains before making a final calculation.
Moreover, many investors choose to buy smaller gold bars and bullion coins. Like so, they can sell over more than one financial year. For example, if an investor bought £60,000 worth of gold coins in 2012 which by 2014 were worth £80,000, instead of realising the full £20,000 profit right away, he could :
- Sell half the coins in 2014 for a £11,000 tax free profit
- Sell the remaining in another financial year.
Please take into consideration that the gold price is constantly changing so the remaining gold coins could be worth less (or more) in another financial year.
You can also look at our range of CGT Free Gold Coins