Sovereigns or other gold.....

[smithy117]

So I'm asking the age old question of what are the pros and cons of buying sovereigns (halves or wholes) over other gold coins.

 

I've decided to dive into gold a little bit and I have no idea on where to start. Any info and pointers would be very much appreciated 

[mr-dead]

Advantages

Very close to spot for a fractional gold coin.

highly liquid.

Capital gains tax free.

Historic coin.

You may get lucky and pick up a rare/good grade sov as bullion.

 

Disadvantages.

There are a few fakes out there like jewelers coins (usually struck in a lower ct gold) even a few old gold plated platinum ones but they are fairly easy to spot when you know what a real sov looks like.

Can get a little boring sometimes stacking just sovs (unless you start buying unique design years like 1989, 2002. 2012 but cost a premium)

Regular bullion sovs will only ever track spot price whereas coins such as queens beasts may appreciate above spot price.

[smithy117]

1 minute ago, mr-dead said:

Advantages

Very close to spot for a fractional gold coin.

highly liquid.

Capital gains tax free.

Historic coin.

You may get lucky and pick up a rare/good grade sov as bullion.

 

Disadvantages.

There are a few fakes out there like jewelers coins (usually struck in a low ct gold) even a few old gold plated platinum ones but they are fairly easy to spot when you know what a real sov looks like.

Can get a little boring sometimes stacking just sovs (unless you start buying unique design years like 1989, 2002. 2012)

Regular bullion sovs will only ever track spot price whereas coins such as queens beasts may appreciate above spot price.

 

 

And I take it there's a high premium on QB's

[mr-dead]

7 minutes ago, smithy117 said:

And I take it there's a high premium on QB's

Not if you buy the current release bullion version, the next release is also due next month.

If you start to buy previous releases they have already increased in price.

https://atkinsonsbullion.com/search-results?searchtext=queens beasts&searchmode=allwords&sort=Relevance&quantity=24&page=1&view=grid&filter_product type=producttype_goldcoins

[Norskgeld]

I buy full sovs and half sovs but, as Mr Dead points out, it can get a bit boring, so I have started buying gold coins from other European countries as they all have their version of a sov.

I have Swiss, Danish, French and Austrian gold coins so far.

Dutch Guilders will probably be my next buy.

Makes it a bit more interesting and I suspect they will be almost as liquid as a sov to sell.

I much prefer a circulated coin than a new, shiny collectors piece like a Britannia or Queen's Beast.

[Pritchard]

@smithy117 i am new here too. Im buying for investment, not collection. But i bought my first soveriegns yesterday.
something i came across when i was looking and talking, is that you pay Capital Gains Tax when you sell gold bars, but not coins (so i had read) - but actually its only the Britannia and Soveregn ranges that are as they are legal tender. So other gold coins like the Kruggerrand are taxable ** << if i am wrong here mod please edit for me. : )

 

i guess your question shouldnt be 'Should i buy a sovereign?' i think it should be 'am i looking to collect or invest? If i am investing, am i investing based on spot prices or collectable appreciation?' < this will then lead you to a type of coin most suitible.

 

 

[Norskgeld]

I think CGT only applies after about £11k which will probably not be an issue for us mere mortals. ?

[Ares]

If you're in a spot where CGT concerns on PM sales are a consideration, you've probably got the cash behind you to not need to sell more than your CGT allowance anyway most likely haha

[Kieran95]

2 hours ago, Norskgeld said:

I think CGT only applies after about £11k which will probably not be an issue for us mere mortals. ?

Always wondered couldn't you wait till April 5  ish (end of tax year) and sell 10k day before and 10k after maybe a question for @mr-dead

[mr-dead]

I believe you can do that, you just have to hope the time you want to sell lines up with the end/beginning of a  financial year.

You can also make use of your other half's allowance taking the total this tax year up to £23,400.

 

[Kieran95]

2 minutes ago, mr-dead said:

I believe you can do that, you just have to hope the time you want to sell lines up with the end/beginning of a  financial year.

You can also make use of your other half's allowance taking the total this tax year up to £23,400.

 

Good points. 23 abit young to get married these days though, I wonder how many young stacker will be rushing to the registry office when the next crash comes ?

[HawkHybrid]

3 hours ago, Norskgeld said:

I think CGT only applies after about £11k which will probably not be an issue for us mere mortals. ?

 

bottom line is like for like 2 coins selling, the cgt free one

is more likely to be easier to sell. 

also consider what if the gold coins bullion value out pace

your cgt allowance due to inflation? (sovs used to cost £1

in the 1900's now they are priced at £200+ or 200x price

increase due to inflation over 100 years. it only takes ~50x

price for a single sovereign size gold coin to take up most

of your cgt allowance. following the trend, in theory that

could be possible in 25 years time.)

also you cannot rely on your cgt allowance if you need to

raise money for opportunity investments eg deposit for a

home.

sovereigns make a great savings style stacking coin.

 

HH

[DonkeyKong]

 

If you earn less than £46,350 per annum you pay 10% CGT, not too shabby as per the example below.

Remember this is pure profit (gains), not total "selling" price

 

From the HMRC website:

Example

Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains are £12,300. Your gains are not from residential property.

First, deduct the Capital Gains tax-free allowance from your taxable gain. For the 2018 to 2019 tax year the allowance is £11,700, which leaves £600 to pay tax on.

Add this to your taxable income. Because the combined amount of £20,600 is less than £46,350 (the basic rate band for the 2018 to 2019 tax year), you pay Capital Gains Tax at 10%.

This means you’ll pay £60 in Capital Gains Tax.

 

 

[MickD]

I'm sure CGT is unlikely to ever be an issue for me.  At what point though, as we swap or sell off stuff we don't want does the tax man become interested from an income tax perspective?  I'm aware of the badges of trade that can be applied but does anyone have any experience/advice here?  I'm not interested in selling stuff for a profit on a regular basis but I would like to get rid of stuff I no longer want or numismatics where I have a better grade.

[HawkHybrid]

1 hour ago, DonkeyKong said:

 

If you earn less than £46,350 per annum you pay 10% CGT, not too shabby as per the example below.

Remember this is pure profit (gains), not total "selling" price

 

From the HMRC website:

Example

Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains are £12,300. Your gains are not from residential property.

First, deduct the Capital Gains tax-free allowance from your taxable gain. For the 2018 to 2019 tax year the allowance is £11,700, which leaves £600 to pay tax on.

Add this to your taxable income. Because the combined amount of £20,600 is less than £46,350 (the basic rate band for the 2018 to 2019 tax year), you pay Capital Gains Tax at 10%.

This means you’ll pay £60 in Capital Gains Tax.

 

 

 

what I'm trying to say is let us say you own a sovereign

versus someone who own a quarter krugerrand. in

2009 bullion for sovs is ~£110. 9 years on it's ~£220.

let's say the krugs bought in 2009 were worn so only

weigh the same as a sov(to make the maths easier).

you sell a sov at £220 cgt free. the other person sells

a quarter krug at £220 (also bullion). now has:

£220 -£110 = £110 in capital gains. notice how the

capital gains is half of the bullion value. most of the

bullion price rise is to keep in line with inflation, ie

maintaining an equivalent purchasing power.

capital gains is not a tax on the pure profit(gains). it's

also a tax on the rise in price due to inflation. given

enough time the person buying krugs will exceed their

capital gains allowance in taxable 'profit' despite not

seeing any material rise in purchasing power.

for those who plan to hold onto their coins for 10+ years,

having 50+% of the bullion value being branded as

subject to capital gains is very serious indeed.

(2009-2018 includes times of deflation, so may not be

accurate as a longer term average for inflation)

 

HH

[silverbeaker]

CGT question here.

When selling your coins, as established already, any profit over and above £11,300 is taxable. Now, my question is how do they know how much you purchased the coins for? And secondly if all your coins were bought over a number of years and essentially “off the books” how would they know to even look in to taxing you? 

Or are we supposed to declare it, taking in to account the purchase prices of coins potentially bought over a decade say at many different spot prices?

Am i missing something?

[caloundracats]

I think the answer is that HMRC believe all good citizens will declare it so as not to consciencely evade tax.  In reality, it is probably different. There is an argument that what they don't know about.......

Each to their own conscience I say.

[DonkeyKong]

Yes its down to you to report your profits, normally end of year self Assessment. But as above you might not remember what you paid, especially if it was 10/20yrs ago. Remember you can also record a loss against CGT, say if all bought a coin/bar that turned out to be fake.

 

HH, 

I am not disagreeing with you, far from it, I am merely pointing out that CGT tax "can" be lower, alot of people assume it is a straight 40% tax on everything and would rightly be worried about it, 10% is alot easier to swallow if needs be.

Thanks

DK

[Martlet]

1 hour ago, silverbeaker said:

CGT question here.

When selling your coins, as established already, any profit over and above £11,300 is taxable. Now, my question is how do they know how much you purchased the coins for? And secondly if all your coins were bought over a number of years and essentially “off the books” how would they know to even look in to taxing you? 

Or are we supposed to declare it, taking in to account the purchase prices of coins potentially bought over a decade say at many different spot prices?

Am i missing something?

You are supposed to declare, tracking purchases and disposals over time to give a reasonable account of transactions.  If you ever buy from an established dealer, they keep your information for KYC/AML purposes - not sure if anywhere will sell or buy over the counter without ID.   Same rules if its gold, shares, land or artwork. 

[silverbeaker]

4 minutes ago, Martlet said:

You are supposed to declare, tracking purchases and disposals over time to give a reasonable account of transactions.  If you ever buy from an established dealer, they keep your information for KYC/AML purposes - not sure if anywhere will sell or buy over the counter without ID.   Same rules if its gold, shares, land or artwork. 

Thanks for that, i wonder how it works with transactions on this forum?

 

28 minutes ago, caloundracats said:

I think the answer is that HMRC believe all good citizens will declare it so as not to consciencely evade tax.  In reality, it is probably different. There is an argument that what they don't know about.......

Each to their own conscience I say.

I would even go as far as saying that lots of people wouldnt even necessarily know that they had to pay CGT on those transactions. 

[Goldmick]

I love sovereign.s there good coins to buy i also buy the qb coins. You cant go wrong with both these coins 

[Roy]

31 minutes ago, caloundracats said:

I think the answer is that HMRC believe all good citizens will declare it so as not to conscientiously evade tax.  In reality, it is probably different.

Yes and yes. It doesn't mean you are a bad person.

[caloundracats]

Of course not, wasn't suggesting anyone was.

[Martlet]

2 minutes ago, silverbeaker said:

Thanks for that, i wonder how it works with transactions on this forum?

Very much under the radar. There's a £1k threshold for trading (so boot fair and eaby sellers dont have to register as traders), after that probably you should report/declare any trades.  And you'll do that indirectly in your accounts so there's always a trail somewhere.  Reckon there's only a couple of people it would affect and i'm sure they report everything correctly.  

 

[HawkHybrid]

I was pointing out that I believe the cgt free status of a

sovereign is worth more than people give it credit for.

even at 10% cgt on 50% of the coins worth as in my

example. that's still 5% on the total selling price of the

coin. 

 

HH