Gold Coins: A Smart Investment Move For Uk Residents?

Gold coins are a popular investment option, especially for those who want to diversify their portfolio and protect their wealth. Gold has been a valuable asset throughout history, and its value often increases during economic crises and inflationary periods. In the UK, gold coins produced by the Royal Mint, such as gold sovereigns and Britannia coins, offer tax benefits that make them an attractive investment option. These coins are VAT-free when purchased and are exempt from Capital Gains Tax (CGT) when sold. However, it's important to note that gold coins may have higher premiums than gold bars due to minting costs. Additionally, investing in gold coins carries the risk of theft, and there are no dividends or interest payments associated with this type of investment.

Gold coins vs. gold bars

Gold has long been considered a smart investment option to diversify portfolios and protect wealth in times of economic uncertainty. Physical gold, or bullion, is an easy way to get started with gold investing. But when it comes to investing in physical gold, which is better: bars or coins?

Gold Coins

Gold coins are often issued by government mints and carry a legal tender face value, which adds an extra layer of security to your investment. They are also available in smaller denominations, making them more accessible for investors with smaller budgets.

Gold coins are minted in continuing annual series, meaning that they often increase in value over time as collectors seek older versions to complete their collections. The British gold Sovereign coin and gold Britannia coin are examples of this. The value of gold coins is influenced by the live gold spot price but also has additional numismatic value based on their rarity and historical significance.

Gold coins are also easier to store discreetly due to their smaller size and can be kept in a fireproof safe at home. They come in various designs, often featuring historical figures or events, making them attractive to collectors.

Gold Bars

Gold bars are rectangular slabs of .999 pure gold, produced in sizes ranging from 1 oz to 1 kg, with various options in between. They are usually minted into a neat cuboid shape, with the weight and purity inscribed on the surface.

Gold bars tend to sell for closer to gold's current spot price as they are less costly to produce than coins. They are also available in a wide range of sizes, allowing investors to choose a bar that fits their investment strategy and budget.

Gold bars are ideal for investors who want to invest in the inherent value of gold rather than its minted form or cultural and historical traditions. The value of a gold bar is determined by its weight and the current market price of gold, making it easy to quantify its worth.

Both gold coins and gold bars have their advantages and disadvantages, and the best option depends on your personal preferences and investment goals. Gold coins offer historical value, legal tender status, and collectability, while gold bars provide a straightforward investment in the value of gold with lower premiums and higher purity.

Tax benefits of gold coins

Gold coins are a good investment in the UK, offering tax benefits that can make them a compelling choice for investors looking to diversify their portfolios. Here are the key tax advantages of gold coins:

VAT Exemption

Investment-grade gold coins are exempt from Value Added Tax (VAT) in the UK. This exemption applies to gold coins that meet specific criteria, including being minted after 1800, having a purity of at least 900 thousandths, and being legal tender in their country of origin. The popular Britannia bullion coins from the Royal Mint, for example, are VAT-free.

Capital Gains Tax (CGT) Exemption

Certain gold coins are also exempt from Capital Gains Tax (CGT) in the UK. CGT is a tax levied on individuals when they sell or dispose of an asset and make a profit. However, gold coins that are legal tender in the UK, such as the £1 gold sovereign and the Britannia, are exempt from CGT. This means that investors can make unlimited tax-free profits on these coins.

Tax-Free Store of Wealth

Gold coins that are legal tender offer a unique advantage as the government cannot tax the movement of its own legal currency. This makes gold coins a tax-free store of wealth, allowing investors to buy and sell without incurring CGT.

Diversification and Risk Management

Gold coins also provide tax benefits as part of a well-diversified portfolio. Gold is often used as a risk management tool, offering stability and a hedge against economic uncertainties. By including gold coins in their portfolio, investors can benefit from both the inherent stability of the precious metal and the associated tax advantages.

Inheritance Tax Planning

While gold coins are not explicitly exempt from Inheritance Tax (IHT), they can play a strategic role in wealth preservation and inheritance tax planning. Gold's traditional recognition as a store of wealth, along with its tax-efficient characteristics, makes it a valuable asset for passing on wealth to the next generation.

In summary, gold coins offer UK investors several tax benefits, including VAT and CGT exemptions, a tax-free store of wealth, diversification and risk management advantages, and potential IHT planning opportunities. These tax advantages contribute to the overall appeal of gold coins as a compelling investment option.

Gold coins as a long-term investment

Gold coins are a good long-term investment option, especially if you are looking to diversify your portfolio. Gold has been a highly valued precious metal throughout history, and its price often increases when other markets are in crisis. For example, the price of gold increased rapidly after the 2008/09 financial crisis and remained high even as economies recovered.

Gold is also a good hedge against inflation, as its value tends to increase during periods of rising inflation. This is because investors want to safeguard their money, and gold has proven its ability to maintain its value. Additionally, gold is a limited resource, and its demand in emerging markets and the technology industry further contribute to its strong price.

Gold coins, in particular, offer certain benefits over other forms of gold investment, such as bullion bars. They are often legal tender, carry historical and traditional value, and are easy to store. They also offer greater flexibility when it comes to reselling, as you can sell a few coins at a time instead of having to sell a large bullion bar all at once.

Some gold coins are also exempt from certain taxes. In the UK, for instance, British gold coins produced by the Royal Mint, such as gold Britannia coins and gold Sovereigns, are VAT-free when purchased and Capital Gains Tax (CGT)-exempt when sold. This can result in greater returns on your investment.

However, gold coins usually have higher premiums than bullion bars due to their smaller size and higher manufacturing costs. They may also be more susceptible to theft, and you won't receive dividends or interest payments as you would with stocks and bonds.

Overall, gold coins are a good long-term investment option, especially for those who value the historical and traditional aspects of coinage. They can provide a stabilizing effect for your portfolio and protect against inflation. However, it is recommended that they make up only a portion of your portfolio, with most of it being in growth funds, stocks, or other investments.

Gold coins for small investors

Gold coins have long been considered a smart asset to invest in. Gold is a good way to diversify your portfolio, and its value often remains strong or increases when other markets are volatile or in crisis. For example, the price of gold increased rapidly after the 2008/09 financial crisis. Gold is also a hedge against inflation, as investors tend to turn to gold when they see their money losing value.

There are several ways to invest in gold, including buying gold coins, bars, jewellery, bullion, ETFs, or investing in mining companies. Gold coins are a particularly good option for small investors as they are easy to store, and you can start investing with a small amount.

• Tax benefits: In the UK, certain gold coins are VAT-free when you buy and Capital Gains Tax (CGT)-exempt when you sell. These include the British gold Britannia coins and gold Sovereigns.
• Flexibility: Gold coins are available in various sizes, making them highly versatile and easy to trade. They also allow you to invest as much or as little as you like at your own pace.
• Historical value: Gold coins have a historical and traditional value that many people hold in high esteem. Some gold coins that are still traded today were once circulating currency.
• Numismatic value: Some gold coins are minted in continuing annual series, meaning they often increase in value over time as collectors seek to complete their sets.
• Safety: Owning physical gold gives you control over your investment, and there is no third-party risk. However, you must be careful to store your gold coins securely to prevent theft.
• Premium: Gold coins usually have a higher premium than gold bars due to the extra minting costs and their commemorative nature.
• Research and verification: It's important to buy gold coins from reputable dealers or financial institutions and verify their authenticity, especially if you're buying from individuals.
• Storage: While gold coins are easy to store, it's recommended to keep them in a safe or rent a safe at a bank to prevent theft.

Overall, gold coins are a good option for small investors looking to diversify their portfolios and benefit from the historical value and tax advantages that come with this type of investment.

Storing gold coins

There are several options for storing gold coins, each with its own advantages and disadvantages. You can store them at home, use a bank's safe deposit box, or keep them in a secure vault. Here are some things to consider for each option:

• Protection: Keep your gold coins away from damp and other corrosive substances to prevent damage.
• Insurance: Check if your homeowner's insurance covers jewellery or valuables, and consider additional insurance if necessary.
• Social awareness: Avoid attracting unwanted attention by not revealing too much information about your gold coins to people you don't trust.
• Accessibility: Gold coins stored at home are easily accessible in case of an emergency or if you want to appreciate your collection.
• Trust: You don't have to rely on any third parties to manage your gold coins when stored at home.
• Selling: It might be challenging to find a trusted physical gold store to sell your gold coins, and the process of testing and estimating the value can be time-consuming.
• Security: Take additional safety measures to protect your gold coins from burglars, such as investing in a secure safe.
• Damage protection: Invest in protective layers (tubes, cases, etc.) to keep your gold coins in good condition.
• Risk of loss: There is a risk of losing your gold coins if they are not properly secured or hidden.

Using a bank's safe deposit box for gold coin storage:

• Security: Choose a reputable and secure bank to protect your gold coins from theft, loss, and damage.
• Accessibility: Ensure you can access your gold coins at any time or withdraw them whenever needed.
• Ownership: Make sure you retain guaranteed possession of your gold coins.
• Safety: Banks are considered secure places, and your gold coins will be protected against theft, damage, or loss.
• Cost: Safe deposit box prices vary, but they can be relatively cheap, especially for smaller-sized boxes.
• Limited access: Bank hours restrict your access to the safe deposit box, which might be an issue if you need to react quickly to price movements.
• Risk of bankruptcy: Banks are not immune to bankruptcy, and you could lose direct access to your gold coins if your bank shuts down.
• Insurance: Banks typically don't insure the contents of safe deposit boxes, so you may need to purchase separate insurance.
• Resell: It is easy to resell your gold coins 24/7 and have the proceeds wired to your bank account anywhere in the world.
• Security and insurance: Your gold coins will be stored in secure, specialised bullion vaults that are fully insured and subject to regular audits.
• Delivery: You can choose to have your gold coins delivered or shipped to you overnight or within a few days, depending on your location.
• No direct physical access: You won't be able to physically access your gold coins in the vault for security reasons, but you can request delivery whenever needed.
• Shared gold: Some gold resellers sell "shared" or "mutualized" gold, where you own a portion of a larger gold bar instead of an entire bar.

Ultimately, the choice of how to store your gold coins depends on your individual needs and preferences. Consider factors such as accessibility, security, insurance, and cost when making your decision.

Frequently asked questions