Does Physical Gold Attract Wealth Tax?
Gold has long been an investment pillar, providing investors with a tangible store of value to protect themselves against inflation, currency fluctuations and economic volatility.
Physical gold coins and bars are VAT-exempt and capital gains tax (CGT) exempt, however investing can incur upfront and ongoing costs such as premium payments, insurance policies and offsite storage.
No
Gold remains an attractive investment option as a tangible store of value and protection against inflation and economic volatility. Investors can purchase physical gold bars, coins and jewellery from bullion dealers or jewellers but there may be additional costs such as insurance and storage charges when selling their gold assets. Furthermore, when selling assets they must also pay GST.
In 2000, the UK government exempted investment-grade gold from VAT in order to encourage investments and bring it in line with other VAT-exempt commodities like stocks and shares. The exemption only applies to coins issued by the Royal Mint that are legal tender and recognised as such (i.e. PS1). Therefore if selling other physical gold forms such as bars it will incur capital gains tax (CGT).
Long-term gold investors may be able to avoid capital gains tax by reinvesting the proceeds within 45 days after selling the original investment into another precious metals asset, rather than cashing out for immediate financial gain. Unfortunately, this strategy won’t work if you want a quick financial gain now.
Gold investments can also be made via mutual funds or exchange-traded funds that own physical bullion on your behalf, eliminating storage and insurance costs altogether. However, these types of investments tend to be more volatile than direct purchases of physical bullion; any profits realized will likely be subject to income tax and short-term capital gains tax (STCG), rather than long-term capital gains tax (LTCG).
Yes
Physical gold sales is subject to wealth taxes upon sale; however, investors can mitigate its burden with smart tax planning strategies. Investors should seek the advice of both investment and tax professionals when trying to minimize taxes as much as possible.
If investing in physical gold, investors should look towards coins minted by the Royal Mint or bullion bars marked as legal tender. Both forms of investment-grade gold are VAT-free and generally do not attract capital gains taxes (CGT), depending on your circumstances. This exemption was introduced in 2000 in order to bring gold investments closer in line with other tax-free investments as well as align the UK with EU countries where such taxes do not apply.
Investors investing in physical gold through mutual funds or Exchange-Traded Funds will face higher tax rates for their returns; typically 20% plus 4% cess for long-term capital gains and additional taxes according to applicable slabs for short-term gains. Sovereign gold bonds also follow this system of taxation; though the return rates vary.
Reinvesting profits from selling precious metals back into similar investments such as physical gold or ETFs can also help reduce taxes; however, investors must remember that the IRS only levies taxes on profits realized from selling rather than any inflation-related value increases; for this reason many choose to hold onto their precious metals until it comes time to sell and then reinvest them when selling time arrives.
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