Is it worth buying Britannias?

[HighlandTiger]

Just musing some random thoughts.

Now we all know that for us in the UK, buying Britannias has a distinct advantage over other silver coins in that it is free from UK Capital Gains Tax (CGT). But buying Brits always seem to be a bit more costly than buying cheaper Arks, maples etc. But do the numbers work out?

Currently on STG, Brits are 5%-7% more expensive than the cheapest silver 1 oz coin.

We all have a CGT allowance limit, of £11,000 per year. Which unless someone has deep pockets or silver goes to the moon, none of us are really going to worry about hitting that target.

UNLESS of course people have other investments, which have a CGT element. If people are investing in PM's for their retirement, £11K isn't going to allow you to live in the luxury you will be hoping to be accustomed to. (we all would like to retire early and live off the profits of our investments in theory, leaving the initial investment untouched).

CGT is currently 18% for basic rate taxpayer. So if there is any chance that your retirement investment profit pot is going to go above £11k per year, it may be worth considering offsetting that allowance by buying Brits at 7% premium (at today's lower prices) in order to save having to pay 18% on other silver coins at a later date, (when silver has gone to the moon).

Unless of course you're going to tell HMRC bugger all about your PM's, (or if you still think the world's banking systems are about to implode, and we are going to be buying toilet rolls in Perth Mint Koalas ), then I suppose you're never going to need to worry about saving money in the future when arranging your exit strategy. 

Today,  Price of Silver £9.15 

STG

100 Noahs Ark = £1138

100 Brits = £1201

If Silver goes to £50

Selling at £50 scrap value (ignoring any possible premiums Brits may have over arks in the future)

100 Noahs Ark = £5000 = £3862 profit, minus 18% CGT = £3167 profit

100 Brits = £5000 = £3799 profit, minus 0% CGT = £3799 Profit.

In this scenario, buying Brits today over Arks, will gain you an extra £632, if silver goes to the moon.

 

 

 

[Danny-boy]

But you wouldn't pay CGT on those profits anyway.

CGT is only on the profit, as you know, so in any year you could sell up to the 11K limit in a year.

You'd need a lot of silver, or an astronomical price rise to hit that I'd say. Or other investments that you need to liquidate at the same time as you rightly said.

You get that limit annually, so you could also break up the sell-off a bit.

A box of Brits is say £6k. If silver goes to £30 (realistic) then they would be worth £15000. So you could still sell a box a year (two in the first if you time it right).

I have thought about this before, and can't argue with your reasoning.

I guess it all depends on whether silver goes to £30/50, and if you decide to go by the rules [emoji1]

[SilverPirate]

Your stack will form part of your estate if you declare it anyway, which you should by law .Inheritance tax  stands at  £325,000 per partner so if your total assets are less than £650,000 there is no tax to pay, when both partner's demise. our descendants will not pay CGT on our stacks i don't think.

In what scenario would we pay CGT on selling our stack's?

[ArthGoch]

Also all coinage that does not incur CGT exemption (and which you are looking to pass on to children and grandchildren,) can with careful planning be exempt from all Inheritance Tax by way of a Deed of Gift.

Although there are requirements in  regards to both longevity between giving the gift and dying, as well as the annual value of gifts made, it is worth considering if you perceive your total estate will exceed the value at which Inheritance tax is applied

[BaldyBob]

I agree HT, CGT avoidance is pumped by the dealers as an excuse for higher premiums and should not be the main reason for stacking Brits for the vast majority of holders.

Do they deserve such a high premium? No, is my personal opinion. That being said they are of a similar price in STG as a coin minted in Germany and backed by a failed State. Figure that one out

Do I have any in the stack? Of course, but this is more to them being more widely recognised/accepted by the wider public in the highly unlikely event that these things regain some sort of currency status. In that event I would imagine anything with the Queen's head on, or from Austria or the USA would fit the bill though.

[JB3]

1 hour ago, BaldyBob said:

 

Do they deserve such a high premium? No, is my personal opinion. 

 

I agree. That's why I don't own a single one. I cannot conceive of a situation where I'd have made £11k profit on my silver alone (and all my gold is in sovs) at my current accrual rate.

 

I suppose if I really start hoarding silver (and, frankly, the VAT puts me off in favour of gold anyway) I'd reconsider.

 

Another question you'd have to ask yourself though, considering the time value of money, that CGT is a marginal tax, etc., is: Even if you do have enough to incur CGT, is saving 18% on the profit at some undefined point in the future worth paying a 7% premium on the capital now?

 

I'm not sure it is.

 

 

[Pete]

If you are stacking weight hoping for a long term gain then buy the cheapest silver.

If you are stacking and part of the group of people on this forum then you are probably, like me, infected with the silver bug.

That means a person who is more than likely to have coins or bars weighing in from a few dozen ounces to perhaps several thousand ounces. We stackers have collections rather than bulk volumes I assume.

This is more of a hobby than a serious investment for many so collecting different coins is what most of us do.

Capital gains is not on my radar - more chance of BIG capital losses right now !

Traditionally the silver Britannia was a desireable collectible coin, fetching fairly high premiums a few years ago. Since the RM cocked up its first 999 silver coin and had major quality issues, it has lost reputation. The last two coins have avoided the traditional polished background and personally look less attractive. I was an avid collector of Brits but now only buy a few each year for continuity whereas in earlier years I could easily have bought hundreds.

[sovereignsteve]

Britannias used to be worth buying, when they were a semi-numismatic coin and subject to collectors pushing up the price. They are simply a bullion coin now, with no effective cap on mintage, and as such should not command a premium. The only people who should be buying them are those who need the latest year to keep their date run going.

[garthy]

I bought some 2015 brits on the hope the textured finish would be for one year only, now it looks as though they're sticking to that finish I think I'll leave them.

As far as CGT goes I'd say unless You're lucky enough to have something like a second home and You're planning on selling all investments in the same tax year I doubt it'll affect the likes of us, if it does it'll mean silver's hit the moon.

[HawkHybrid]

 a sovereign bought/held for the price of £1 maybe in the

1920s is now worth £170+. if that was non cgt free it

would be worth £1+£169 cgt taxable profit.

being cgt free is worth having. mostly in larger stacks.

silver doesn't need to go to the moon, if it just keeps up

with real inflation then the profit on a coin is going to

make up more of it's selling price than the cost. especially

when you're talking decades before you sell.

buyers may also be more interested in cgt free coins.

being cgt free does make it slightly easier if you need

to sell larger amounts quickly.

 

edit: also if I had to sell I would sell my non cgt free coins first.

 

HH

[SilverSniper]

I know I keep moaning about the RM, but my point is the RM charge high premiums and can get away with it, as they are the RM; they do not care about being competitive.  Unfortunately when it comes to liquidating silver, you will not recover any premium prices, you will only get a deal based on the price of the silver weight itself.

An example of the RM pricing model is that they only produce one silver bar, and at 100g it is most likely the most expensive 100g of silver you can buy.  Their prices do not fall when the silver spot price plummets either.

So my tuppence worth: If you are buying silver as an investment, unless you see Britannias at a bargain price, there are much more profitable options out there.  And your shouldn't really care about the design on the round/bar either, as that means very little at the point of you selling it.

My silver collection is worth quite a bit, but it is a hobby, much like a magpie thing. I do not feel I'd make a huge 'pension' type of profit over what I paid, if I sold it.

[JB3]

26 minutes ago, HawkHybrid said:

 a sovereign bought/held for the price of £1 maybe in the

1920s is now worth £170+. if that was non cgt free it

would be worth £1+£169 cgt taxable profit.

 

 

It would be £169 taxable profit, but you'd have to have another £10,831 of taxable profit in this tax year alone before it'd cost you a penny.

 

Also remember, in today's money, you're saving 18% tax on £169 now but presumably - assuming premia were the same then and gold's value is constant across time - you'd have paid about 7% extra on £170's worth (the £1 in 1920's money) then.

 

Given the underlying capital value went up by 170x in the intervening period, you'd have been better off investing the 7% premium in more gold with no CGT protection. That 7% could have appreciated a lot more than the £30 tax you're saving by being CGT-exempt (although I think using the numbers in this example, the CGT just wins it).

 

Everyone's circumstances are different of course, and if you have a massive hoard that you are planning to liquidate as your sole source of income in retirement, for example, then I can see why CGT-free bullion could make sense at the margins of your portfolio. But for most people, I don't think it's worth the extra premium now to save tax on the profit margin later. There are better ways to spend today's money - like more metal.

[HawkHybrid]

what I was trying to illustrate is that cgt is also a tax on

accrued inflation from when you bought to when you sell.

(the figures have changed but what the sovereign traded

for in everyday goods and services haven't changed by

170x !)

given time much of the selling price is profit. so £11k cgt

allowance means ~£11k selling price. (do you expect

your stack to be worth <£11k when you come to sell?)

 

(you're figures don't add up, 7% more gold is worth ~£12

for a sovereign £170 and is less of a gain than the 18%

saving on cgt or £30 by your figure)

 

HH

[shemyaza]

Assuming The Gold to Silver ratio continues its historical waves, CGT is irrelevant until you intend to fully exit PM's whereby holding all CGT is advisable. Holdings in ounces aren't taxable. Buy Silver at G:R ratio of near 80 and sell at near 40. If you hold Gold, Sell at 80 into Silver and at 40 sell Silver into Gold. You should have vastly more ounces without spending anything each up and down. CGT then becomes irrelevant as it's based on money held not ounces held. That's why Silver sold off in 2011 before Gold and why that sell off went straight into Gold to exploit the Ratio gain of over double ounce profit at 32. It was 82 a few years before. Now you know why people were buying expensive Gold and now can sell it for vastly more Silver 32 to 77 currently.......that's another doubling of ounces held. Money is a brief snapshot of holding just don't hold it on the 5th April. It's a viewpoint I won't mention again, useful if you want your metal to work as a re-invested dividend.

[BaldyBob]

1 hour ago, HawkHybrid said:

a sovereign bought/held for the price of £1 maybe in the

1920s is now worth £170+. 

Off on a tangent, but that tells use all we need to know about the debasement of the £.

[shemyaza]

It's the £1 and £170+ aspect which is the distraction, from 1920 to 2015 Sovereigns to Silver, Silver to Sovereigns over and over again, you'd have many Sovereigns now and spent nothing extra over that £1.

[JB3]

35 minutes ago, HawkHybrid said:

 

given time much of the selling price is profit. so £11k cgt

allowance means ~£11k selling price. (do you expect

your stack to be worth <£11k when you come to sell?)

 

 

I agree, the proportion of profit rises with time. But most sellers these days didn't buy their metal in 1920, I'd wager. Different starting prices / gains can make the CGT more or less relevant.

 

As for my stack, I'll be very pleasantly surprised if I have enough in my retirement (about 20 years hence) that I'm selling £11k of profit each year, especially as I'm unlikely to liquidate it all in year one. (Notwithstanding that CGT threshold tends to rise with time.) Those with larger hoards could, of course, mobilise this much each year; that's a *lot* of metal, or a lot of wealth in a diversified portfolio...

 

 

[HighlandTiger]

I think a few of you are missing the point I was trying to make. We all know that the chances of any of us making £11k a year profit solely on our silver alone is pretty much negligible, BUT and this is the big BUT, IF you have other investments which are subject to CGT, such as property, shares, antiques, paintings etc, which all add to your CGT allowance per year, is it advisable to add another investment such as silver ON TOP of your investments that are CGT related, and thus creeping you closer to the £11k limit or pushing you over the limit and then be liable for the tax. Say I sell a bunch of shares where I made £11k profit, then I will have used up my allowance, if I then sell any of my non Brit silver, I'm going to have to send the tax man 18% of any profit I make.

If you only have PM's in your investment portfolio, and you think you will never hit £11k in profit per year, then buy what you want, this will not affect you, but if anyone has other investments, as I have described, then it might be prudent to pay the extra few% premium on brits now, than risk having to pay a sum of money to the taxman

 

[JB3]

True enough.

 

I suppose a mix of assets is useful for selling when you are above the CGT threshold. 

 

[Mind: I've pretty much stopped buying silver anyway... it's not just the premium, but the VAT! I'm persuaded that gold is a better buy.]

[shemyaza]

And I'm just using Gold and Silver as an example of 1 cycle of many. Silver is the Metal to buy right now. Gold is not the metal to buy as I suspect the price will show over the coming months as the essence of the cycle is barter value and IS the Derivatives market. The Gold to Silver Ratio is Bible to the entire PM market. When Gold buys the most Silver at the top, that's the time when Silver is cheap. In 2011 at 32 Silver was extremely expensive to Gold thus you bought Gold by selling Silver be it paper or physical. We are near the top of the Ratio, 77 where selling Gold into Silver buys the most Silver. In 1980 it was 14, In 1998 it was 38, in 2011 it was 32.

[JB3]

I am sure you are right, I know little of cycles.

 

But with VAT (even marginal VAT if buying from the EU) and delivery, it has to be a considerably better buy to beat some sovs from a local dealer.

[HighlandTiger]

1 minute ago, JB3 said:

I suppose a mix of assets is useful for selling when you are above the CGT threshold. 

This one of the reasons, I'm looking into P2P lending, where I have an allowance of £1000 of interest payments before paying tax, and Property Partner, where the rental portion of any profit comes in the form of a dividend, which from April will have an allowance of £5000, and any sold property profit comes out of my £11k CGT allowance. Company Shares are the same scenario .

So the way I'm looking at it for my future retirement plans, is to try and not pay any taxes to the Government, but to create an investment portfolio, that allows me to live on profits within the £11k CGT allowance, the £1k Interest allowance and the £5k dividend allowance. Topped up with my CGT free gold sovs, and possibly (still thinking it through) CGT silver Brits,

Having discovered this week that my pension pot is twice as large as I thought it was. (It seems a pension I had with an old employer has been sitting quietly away earning me cash all these years without me knowing) With a lot of it being accessible in 5 years time when I'm 55, it has put things into perspective that I'm going to have a lot more money that I thought I was getting, and I have no plans to let the tax man get his grubby mitts on it.

[shemyaza]

40yrs back. Up and down, ounces to ounces, now think back from 1920 this was still true up and down. This is just the G:S cycle. So many exist.

But as long as it's Silver, Britannia's are good. I prefer Kangaroo's but have Britannias as they are lovely coins.

[HighlandTiger]

1 hour ago, shemyaza said:

Assuming The Gold to Silver ratio continues its historical waves, CGT is irrelevant until you intend to fully exit PM's whereby holding all CGT is advisable. Holdings in ounces aren't taxable. Buy Silver at G:R ratio of near 80 and sell at near 40. If you hold Gold, Sell at 80 into Silver and at 40 sell Silver into Gold. You should have vastly more ounces without spending anything each up and down. CGT then becomes irrelevant as it's based on money held not ounces held. That's why Silver sold off in 2011 before Gold and why that sell off went straight into Gold to exploit the Ratio gain of over double ounce profit at 32. It was 82 a few years before. Now you know why people were buying expensive Gold and now can sell it for vastly more Silver 32 to 77 currently.......that's another doubling of ounces held. Money is a brief snapshot of holding just don't hold it on the 5th April. It's a viewpoint I won't mention again, useful if you want your metal to work as a re-invested dividend.

If you sell any silver, first you have to convert it into cash, this would immediately render you liable for CGT, even if you immediately spent that money on gold, or vice versa.

This would only work if when you sell your silver, you sold it at a profit of less than £11k.

It's no different to selling some shares and spending that money on gold. If you make more than £11k in profit on selling those shares you will be liable for CGT no matter what you spend that money on.

 

[shemyaza]

Don't forget, if it's Silver, VAT is deductible as a purchase cost against CGT. Now we look at how the system is set up. At the bottom you buy expensive Gold. You sell it in money terms at a loss when the ratio is high (No CGT as you lost money selling it). Coincidence that Silver has VAT and Gold doesn't. No. True point though Highland, again we are not looking at huge profits amongst us here. I'd "Part Exchange" my Silver for Gold but discuss with HMRC prior to that if CGT consideration was an issue and discuss Barter transaction rules with respect to VAT. I'd also ask as I'm receiving Gold in exchange for Silver that I paid VAT on already, what amount of VAT do I have to pay on Gold? Of course as you see at the top of this, the answer will be an erm 0.00%. Interesting logic exercise and I'm looking forward to the next chat I have with them as they are most informative. The Pensions information I passed on a few months ago regarding week 1/month 1 taxation on partial cashing in of defined benefit holdings was one such enlightenment.

Excellent Highland, thank you for going through that as I wasn't thinking of those levels of profits. I always check before doing anything. Just don't do stuff near tax year end, it can be a grey area between one tax year and another. Be clear in your timings. 2011 is another logic exercise as to how the Silver top was treated at 32 right in that April time.