The Labour government has settled into its new term with a raft of progressive tax policies, public investment pledges, and plans to improve long-term fiscal and environmental sustainability. The budget, inspired by these aspirational ideas, included a rise in capital gains tax (CGT) and a broader inheritance tax (IHT) net, prompting investors to consider tax-efficient gold as part of their portfolios. So, how can gold help mitigate the effects of these new policies?
Budgetary Constraints
The Autumn Budget 2024 has introduced significant tax changes that are reshaping the UK investment landscape. Capital Gains Tax rates have increased sharply, and Inheritance Tax reforms now target assets that were previously exempt. These adjustments have led many investors to reassess their portfolios, with physical gold emerging as a tax-efficient, secure, and flexible investment.
Gold’s key differentiator is its potential CGT exemption (dependent on personal circumstances), which sets it apart from heavily taxed assets like property and shares – both of which form the backbone of many investment strategies.
Gold and the rise in CGT
Capital Gains Tax is applied to profits made when selling assets such as property, stocks, valuable items, or digital assets, once they exceed the tax-free allowance. Over the last three years, this allowance has dropped drastically:
- 2021: £12,300
- 2023: £6,000
- 2024: £3,000
This reduction means more investors are caught in the CGT net. The October budget also increased CGT rates from:
- 10% to 18% for basic-rate taxpayers
- 20% to 24% for higher-rate taxpayers
The capital gains tax rise was implemented on the very day of the budget, which meant any assets sold from 30 October would incur the new higher tax rate. If you hadn’t sold beforehand you’re still on the hook for the higher rate. The change impacts gains made from many assets including property, stocks, bonds, valuable items like art, jewellery and antiques and digital assets like bitcoin. So going forward, more investors should consider the advantages of tax-efficient gold, reallocating funds into Royal Mint-minted coins to protect their gains from the erosion of higher taxes.
Why Gold now stands out
Gold, however, occupies a unique position. Investment-grade bullion coins minted by the Royal Mint, such as Britannias and Sovereigns, are exempt from CGT. This is because these coins are classified as legal tender, meaning they are considered currency rather than taxable investments.
For investors holding property or equities, the rising CGT rates have eroded potential net returns. In contrast, tax-efficient gold – particularly in coin form – allows profits to be preserved for many uk investors.
In addition to its tax benefits, gold’s performance over recent years has been robust:
- 87% growth in value over the past 5 years
- 176% growth over the last 10 years
Discover Gold’s Unique Tax Advantage
Most investments are subject to some form of taxation, but physical gold can be totally free of VAT and capital gains tax.
While gold’s value can fluctuate, its long-term trajectory has consistently trended upwards. For strategic investors, the capital gains tax exemption further enhances gold’s appeal as a cost-effective, long-term store of wealth.
Inheritance tax changes in the budget
The October budget also introduced a series of changes to inheritance tax rules that could influence the types of assets you choose to pass on when planning your estate. While not as expansive as the CGT taxes, the IHT rules signal a tightening of wealth transfer regulations, which increase the tax liabilities on inherited assets. Many individuals who had previously relied on shares or specific pensions to pass wealth to their heirs are now facing the possibility of higher taxes on these assets.
Specifically, beneficiaries will now have to pay tax on certain unlisted shares, and there is a threshold after which they will also pay tax on business or agricultural property. Of course, it’s possible to plan an estate that optimises the benefits for loved ones, but changing the assets you pass on isn’t always easy or straightforward, especially for property. If the current budget reforms are a harbinger of further changes, it may be prudent to start to consider which assets can be more easily passed on without incurring as high a tax burden.
Physical gold can help. It is tangible, portable and is subject to the “seven year rule” which allows individuals to gift gold to their heirs which will be exempt from inheritance tax provided they live for a further seven years. Unlike real estate or shares, which are more challenging to transfer strategically, gold’s physical nature allows for timely, flexible transfers. If the gold is in the form of Royal Mint-minted coins, then it will also be capital gains tax free when the beneficiaries come to sell.
The growing role of gold in a tax-conscious portfolio
The 2024 budget has introduced a range of tax changes that impact various investment classes, from property to equities, and now even pensions and certain previously exempt shares. As these tax burdens increase, more investors are considering the role of physical gold in their portfolio. It is always wise to diversify, and gold’s safe-haven status is often used to hedge against volatility in other assets. The tax efficient nature of the precious metal, along with the relative ease with which it can be passed down within the “seven-year rule” have raised gold’s profile for post-budget investors. The growing demand for privacy, security, and tax efficiency aligns well with physical gold, making it a smart choice for those who want to safeguard their financial future amid a shifting fiscal landscape.
