UK tax residents

[Last updated May 2015]

In the 19th and early 20th centuries gold Sovereigns and (after the 1844 Bank Charter Act) gold-backed British currency were recognized and accepted everywhere for cash payment. Sadly, today the UK does not qualify as a precious metal friendly country. Standard dealer premiums are steep, there’s a 20% value-added tax (VAT) on silver purchases, and there’s up to 28% Capital Gains tax (CGT) on profits arising from precious metals after June 2010.

Moreover the economy is dependent on perpetuating debt via deficit spending, propping up a huge and massively leveraged banking sector, and unrelenting real estate price inflation. A sovereign debt crisis of some form is inevitable, and if history is any guide, so are the capital and currency controls that will follow.

There are however two key advantages for tax residents of the UK. Firstly, Sovereigns and certain Pound and Pence denominated precious metal coins are deemed legal tender and thus free of CGT. Secondly, the Capital Gains allowance (after allowable losses and reliefs) is relatively generous at £10,600 per annum. Although granted this is a meaningful advantage only to smaller portfolios.

We expect that when the debt crisis hits the UK government will most certainly re-introduce capital and currency controls as it has always done in such situations. The present British pound currency will be devalued and taxation and control of precious metals will increase. Even the CGT-free status of Sovereigns and other precious metal coins may be re-considered.

Strategies for UK tax residents

(unless specified ounces or oz of gold here means equivalent combined value of gold and silver)

As complimentary to the basic strategy outlined here, UK tax residents can:

For portfolios <100oz gold:

  • Keep a quarter in UK CGT-exempt coins, a quarter in other coins and half in an online bailment service like Goldmoney. Have your online bailment account linked to a foreign as well as a UK bank account;
  • Store UK CGT qualifying coins in a foreign safety deposit box or foreign private residence;
  • Purchase 2 Pound (Britannia) 1oz silver coins from European dealers where premiums and/or VAT is lower;
  • Time your selling to take advantage of the Capital Gains allowance;
  • Consider changing your tax residency to low/zero CGT country.

For portfolios >100oz and <500oz gold:

  • For half follow the advice as above;
  • For other half, put smaller LBMA-accredited and other bars in alternate non-UK bailment;
  • Store bars privately in foreign low/zero CGT country;
  • Buy a foreign property in low/zero CGT country and either change or be prepared to change your tax residency.

For portfolios >500oz gold:

  • Stronger emphasis on storing your metals internationally;
  • Majority of ounces should be in full service bailment, with some gold and silver coins kept at properties, safe deposit box(es), and some more ounces in online bailment services;
  • Look into setting up a SIPP where you retain direct title and physical control over LBMA-accredited bars;
  • Buy a foreign property in low/zero CGT country and either change or be prepared to change your tax residency.


CGT exempt coins

For UK tax residents Capital Gains tax (CGT) on precious metal investments is subject to a £10,600 annual allowance. Essentially this means that if you bought metals for £20,000 and later sold them for £30,600 you would have no CGT to pay. We note that HMRC can and does regularly change its mind on tax issues. That being said, this particular allowance has actually gone up rather than down in recent years.

If your portfolio of physical precious metals is such that you may exceed this allowance, or you want the option of selling your entire portfolio all at once (a valuable option to have), then you can further protect your profits by investing in gold and silver coins that are exempt from CGT.

Gold and silver coins produced by the Royal Mint and which qualify as sterling legal tender (see here) are exempt from CGT when sold. This includes the Sovereign (from 1837 onwards) as well as silver and gold Pounds and Pence coin of various series, sizes and denominations. The following table outlines coins that qualify.

Be aware that many Royal Mint coins share the same denomination but can have widely varying actual gold weight (AGW) and actual silver weight (ASW). For example, there are no less than six varieties of silver 2 Pound coins available ranging from 1.002 troy ounce to 0.257 troy ounce ASW.

Royal Mint legal tender coins that are exempt from Capital Gains tax (CGT) for UK tax residents
Gold Silver
Full, 1/2 and 1/4 Sovereign 10, 2, and 1 Pounds
100, 50, 25, 10, 5, 2 and 1 Pounds 50, 20 and 10 Pence
50, 20, 10, 2, and 1 Pence All pre-1947 silver sterling coinage



Buy silver in Europe

(See our blogpost How to avoid VAT on silver coins)

Premiums for gold coins and bars are only slightly lower in Europe compared to the UK. And dealers in the UK will offer discounts on premiums for buying in bulk. For example, we have seen premiums of 2% above spot for buying 10 x 1oz gold Krugerrands. Where UK gold buyers may come out ahead is by buying on a visit to Hong Kong where premiums can be ultra low.

Silver on the other hand can be bought notably cheaper in Europe than in the UK due to generally lower premiums. In our 2013 survey of four UK dealers the average ask premium for 100 x 1oz Silver Britannias was 30%. And this is before the 20% VAT added on top. Of particular interest to UK tax residents is the strategy of buying CGT-free silver 2 Pound coins (also known as the 1oz Silver Britannia) in Europe and bringing them back to the UK. This can be done by courier or transporting it yourself.

In Germany, three dealers reported an average ask premium of 16.1% (see table below). Shipping with full insurance would be around EUR50 and there are no custom duties payable. In addition, no sales tax or import VAT is payable because German VAT is included in the coins price. The only snag is if the German dealer has exceeded their EU-mandated foreign delivery quota, although this can be circumvented by picking up in person.

In addition, it is possible to completely avoid VAT by using an approach we outline as Tip#2 in our section on how to Minimize buying taxes. That section contains other buy-side tax saving tips, most of which are applicable to UK tax residents.

(Based on Q1 2013 survey) (ask) premiums for 1oz Silver coin and bars
x1 x10 x100
UK 1oz Britannia 44.8% 36.3% 30.1%
1oz Philharmonic 36.4% 24.4% 21.7%
Bar (1oz) 6.1% n/a n/a
Bar (1kg) n/a n/a n/a
Germany 1oz Britannia n/a n/a 16.1%
1oz Philharmonic 11% 11% 11%
Bar (1oz) 40% n/a n/a
Bar (1kg) 6.2% n/a n/a


Changing your tax residency – foreign property

Owning foreign real estate is a great approach to changing your country of tax residency. For example, retiring, studying or working from your German, Swiss or Hong Kong property for about a year will qualify you to avail of the precious metal friendly CGT rules in those countries. If precious metal prices suddenly go up and you want to sell some locally, then internationalizing yourself like this will make a huge difference to your profits.

Of course, you can establish tax residency by simply moving to another country but it will be more difficult to convince Her Majesty’s Revenue & Customs (HMRC) of your new status. Once the debt crisis hits HMRC may not be so willing to accept claims of changes to tax residency status. If you already own your foreign residence this will give more credibility to your claim. Also, the capital controls that will be introduced will make it difficult and expensive, if not impossible, to get sufficient funds out of the UK to buy a foreign property. Plan ahead and secure the foreign property now.

Owning real estate abroad also increases your options for storage. Having a few coins on hand and perhaps a few located discreetly within or around your foreign property is a common strategy. Having your metals in the same country as your preferred tax residency hedges against the risk of international tax treaty rules being changed and gives you more options for converting your metals into local and international assets.

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