This article discusses a series of capital gains tax (CGT) changes introduced within the last 12 months. It explains what CGT is and how it is applied. How changes to the allowances could affect you with illustrations on how these work. We go into investments CGT applies to and strategies you could employ to mitigate its effect.
We have been talking about these changes since they were first announced but not everyone follows the news or takes action when they need to.
We are keen to avoid a last minute rush and want to be able to help as many people as possible. Join us for a live online group discussion where we will be covering this subject and answering your questions. If you can’t make it you will be able to catch the recording on our YouTube channel.
What is Capital Gains Tax?
CGT is a tax generally applied to any money you make when selling assets that have increased in value from the time you bought or otherwise received them. For example, if you buy an investment for £5,000 and sell it for £10,000, you would be making a profit, or capital gain of £5,000.
When were changes to CGT announced?
Last March, the Chancellor, Jeremy Hunt, delivered the Spring Budget 2023 speech in which he announced Capital Gains Tax changes. The allowance was slashed from £12,300 per year to £6,000 in April 2023 and is due to be halved to £3,000 in April 2024.
Read 'Capital Gains Tax – Changes following Autumn Statement'.
Does Capital Gains Tax apply to the sale of all assets?
Not all assets are subject to CGT. The amount of tax varies according to what you are selling and your individual tax status. The government has designed exemptions to favour certain assets and not others.
5 types of assets that are exempt from CGT?
- Stocks and shares held within an ISA are exempt from CGT.
- All British legal tender coins, including gold, silver and platinum bullion coins like Sovereigns and Britannias, are exempt from CGT.
- Personal possessions worth less than £6,000.
- ‘Wasting assets’ with a useful life of 50 years or less.
- Certain investments, such as government bonds and life insurance policies that offer protection.
We’d recommend you check your situation with your accountant or financial advisor as we are not licenced to give financial advice.
How Does CGT Affect Precious Metal Investments?
CGT is applied differently to different forms of precious metal. If you want to reduce your exposure you need to make sure you buy the right type.
Read 'What Bullion Is Capital Gains Tax Exempt?'
Will Capital Gains Tax apply to the future sale of my investment gold and silver bars?
Yes, if you make a gain on taxable assets in any one tax year, taking you over threshold you will be taxed on any declared gains on all bars regardless of the metal.
Does CGT apply to coins, and is this the same for different metals?
British legal tender coins are exempt from Capital Gains Tax. Common examples are gold Sovereigns; gold, silver and platinum Britannia’s as well as other coins like Queens Beasts, Royal Arms etc. If you aren’t sure then you can always ask us.
Investment coins like Krugerrands, Maples, Eagles etc are not exempt from CGT however you will only be subject to tax on declared profits over and above the allowances.
FAQs
How does Capital Gains Tax apply to an inheritance?
Upon death, the estate of the deceased will benefit from inheritance tax allowances. Assets over and above this amount will be subject to inheritance tax, not CGT. On the date of death the assets are valued and from that point, changes in value are treated as a capital gain or loss incumbent on the inheritor. If you want to discuss an inheritance specifically then give the team a call.
If I have investments that are not exempt, what can I do to avoid paying too much tax in the future?
If it makes good business sense to do so, then you could take advantage of the £6,000 allowance before it halves in April by selling assets that are likely to generate a taxable gain in the future. You could then reinvest in tax exempt and in the case of gold and silver would be British legal tender coins.
If I plan to buy and sell simultaneously, does it matter what the markets are doing?
No not really, you will lose a bit of money during the sales process but it could be worth it as future gains should be protected. If the underlying metal prices are lower, this means you can sell more before you hit the threshold.
If the allowance doesn’t cover the gains I have built up, is there anything else I should consider?
You may wish to seek professional advice. There are strategies you can employ to use your allowances annually over a longer period of time. This is where owning smaller pieces helps since you have more control over how much you liquidate at any point in time.
We’re here to help
We are not licenced or regulated advisors and cannot advise, but we have a lot of experience. We can provide guidance to familiarise you with the choices available. Not every financial advisor or accountant fully understands precious metal investing. Once you’re equipped with the basics, they should be able to help you shape your plan.
We hope you have found the information in this article useful. Please feel free to bookmark it and share with friends and family who might benefit.
You are also invited to join our free webinar or watch the recording on our YouTube channel. If you need individual help please contact the team for more assistance.
