Captain Gains Tax Explanation

[Kitalon]

I'm wondering if someone can give me a bit more guidance about CGT. I know it's bandied around as being a good thing that UK coins are CGT exempt but what does it actually mean? How does it work? Do you have a threshold of how much you can gain annually before you pay tax? Does it only come in to play for large sums of money? What happens if you sell privately, or is it only relevant when selling to businesses? How are the gains proved, how is the tax calculated and to whom do you declare and pay it to (HMRC I'm assuming)? What if you don't have a receipt from purchase? 🤔

[modofantasma]

https://www.gov.uk/capital-gains-tax

Start with that 👌🏽

[KitboyE17]

What the tax man don’t see - he doesn’t see 😎

One great advantage of the Silver Forum. 

[HonestMoneyGoldSilver]

AFAIK:

1) CGT is Capital Gains Tax. Yes, you have a Capital Gains threshold/allowance every year. As of April 2024 it will be £3,000/year. In the current tax year it's £6,000. If you bought a foreign graded gold coin like an American Eagle for £1,000 and sold it for £10,000, you would be liable for tax of 10% or 20% on the PROFIT over the £6K threshold, in this example £3,000 so £300 or £600 is due in CGT depending on your total yearly income (the higher rate is paid if your total yearly income from all sources is above £50,270). If you do the same thing next year with the £3K CGT threshold, then instead of paying £300 or £600 in tax you would be liable for £600 or £1200

2) You can buy and sell an unlimited amount of CGT-exempt gold coins in the UK as a private seller without declaring anything to anybody. As they are CGT-exempt no taxable event has taken place therefore no records need to be kept and nothing needs to be legally declared

3) You can buy and sell up to £85,000 in CGT-exempt silver coins per year before you hit the threshold when you must register for VAT with HMRC regardless of the profit you've made or the CGT-exempt nature of the coins you've sold

4) If you do any of the above as a business then you pay taxes on your net profits the same as any other business, but you do not pay tax on the CGT-exempt gold or silver

5) As a private collector/seller it's always an advantage to buy CGT-exempt coins especially when it comes to gold as it's feasible you will be liable for CGT in future if you stack non-CGT-exempt gold. The CGT threshold has fallen from £12,300 to £6,000 to £3,000. You don't have to be a rocket scientist to see where it's heading - £0. At the same time we expect gold to be worth significantly more in 10 years' time compared with today. If you buy and hold anything other than CGT-exempt metals you're adding complication and setting yourself up for a tax bill. I believe a 1oz Britannia coin (CGT-exempt) costs more than a 1oz Britannia gold bar (not CGT-exempt) due to expenses related to accounting/taxation

[BackyardBullion]

40 minutes ago, HonestMoneyGoldSilver said:

 

3) You can buy and sell up to £85,000 in CGT-exempt silver coins per year before you hit the threshold when you must register for VAT with HMRC regardless of the profit you've made or the CGT-exempt nature of the coins you've sold

4) If you do any of the above as a business then you pay taxes on your net profits the same as any other business, but you do not pay tax on the CGT-exempt gold or silver

I believe these are incorrect.

The following is not formal tax advice.

If you are a private investor and buy CGT exempt silver or gold you are able to sell as much as you like without having to register for VAT. You are a private investor, not a business. If you are deemed by HMRC to be a business then you will need to register for VAT if your VAT'able turnover is £85,000 or more. Gold is VAT exempt and does not count towards this £85,000 threshold.

In theory, you can buy £1m gold in 2020 and sell it for £2m in 2024 and not have to declare it or pay any taxes on it, assuming you are just a private investor.

HMRC might have questions for you though!

Regarding point 4.

If you are deemed to be a business trading for profit then CGT exemption does not apply. You pay taxes on profits regardless of the CGT status of the coins.

 

[Bigmarc]

34 minutes ago, BackyardBullion said:

f you are deemed to be a business trading for profit then CGT exemption does not apply. You pay taxes on profits regardless of the CGT status of the coins

Everyone who buys a coin is hoping to make a profit. The threshold for eBay, Etsy and vinted is 30 items a year or £1000 before it's reported to HMRC. 

https://www.channel4.com/news/factcheck/factcheck-do-you-have-to-pay-tax-for-selling-secondhand-on-vinted-or-ebay 

 

[HonestMoneyGoldSilver]

2 hours ago, BackyardBullion said:

I believe these are incorrect.

The following is not formal tax advice.

If you are a private investor and buy CGT exempt silver or gold you are able to sell as much as you like without having to register for VAT. You are a private investor, not a business. If you are deemed by HMRC to be a business then you will need to register for VAT if your VAT'able turnover is £85,000 or more. Gold is VAT exempt and does not count towards this £85,000 threshold.

You are correct about the distinction between a private collector and a business with regards CGT-exempt and VAT-exempt secondary market silver. It technically is not a requirement to register for VAT when selling items that are VAT-exempt. If you are selling 3000+ ounces of silver (£85K+) to 500 different people, HMRC might argue you are a business though

2 hours ago, BackyardBullion said:

Gold is VAT exempt and does not count towards this £85,000 threshold.

In theory, you can buy £1m gold in 2020 and sell it for £2m in 2024 and not have to declare it or pay any taxes on it, assuming you are just a private investor.

HMRC might have questions for you though!

Regarding point 4.

If you are deemed to be a business trading for profit then CGT exemption does not apply. You pay taxes on profits regardless of the CGT status of the coins.

 

I said the same thing about CGT-exempt and VAT-exempt gold, you can buy and sell an unlimited amount as a private seller. No CGT = No taxable event, nothing to report.

As a business I agreed they pay taxes on net profits the same as any other business. The CGT-exemption applies to persons and corporate personhoods alike even if it may or may not be relevant to the business

"The following is not formal tax advice", is something I should have added 😂

Anyway, I'm happy to be corrected about the silver and I think we said much the same thing about gold 

[HonestMoneyGoldSilver]

I liked your latest video @BackyardBullion

An interesting side is we worked out what real money is - gold that is CGT and VAT-exempt at all points of sale. It's the only thing in the world that isn't taxed!

 

[BackyardBullion]

Just now, HonestMoneyGoldSilver said:

I liked your latest video @BackyardBullion

An interesting side is we worked out what real money is - gold that is CGT and VAT-exempt at all points of sale. It's the only thing in the world that isn't taxed!

 

Thanks, glad you enjoyed.

Gold is great, but if you trade in gold you pay taxes on the profits.

[HonestMoneyGoldSilver]

1 minute ago, BackyardBullion said:

if you trade in gold you pay taxes on the profits.

This is true if you are a business and can avail of tax deductibles and other benefits.

If you are a private seller that pays all of their own expenses from purchase, storage, marketing and sales to transport and postage without deductibles, you can sell an unlimited amount of sovereigns or Britannias (CGT and VAT-exempt) without generating a taxable event. All the profits are yours without taxation, that's what Capital Gains Tax Exempt means

When you operate as a business it is not the profit on gold you pay taxes on but the net margin you are left with after paying for your tax deductible overheads. If you realise the Capital Gains on gold as a business and make a larger profit, yes, you would be taxed more on that. If gold mooned and the gold is yours to sell as a sole trader and you have no business debts, you could just close your business or extract the gold and sell it privately if it's CGT-exempt

[Kitalon]

1 hour ago, BackyardBullion said:

Thanks, glad you enjoyed.

Gold is great, but if you trade in gold you pay taxes on the profits.

Yes that was very informative indeed and answered many of the questions I had flying around my head. I believe in honesty and integrity and would never want to be missing paying my taxes and suffer the consequences later.

My other question is specifically which coins are CGT exempt? I've heard that it is British (RM) minted legal tender coins that are circulated, BU, bullion and proof, but what about coins from the British overseas territories or other UK mints?

I feel that I would probably want to avoid things like these 1oz gold Krugerrands which are doing the rounds if they are not CGT exempt and may take you over a threshold in the future (say in several years when you may wish to realise thier value). It seems to make the most sense to stick with Britannias and sovereigns to avoid any misfortune.

Edited January 7 by Kitalon

[BackyardBullion]

19 minutes ago, Kitalon said:

Yes that was very informative indeed and answered many of the questions I had flying around my head. I believe in honesty and integrity and would never want to be missing paying my taxes and suffer the consequences later.

My other question is specifically which coins are CGT exempt? I've heard that it is British (RM) minted legal tender coins that are circulated, BU, bullion and proof, but what about coins from the British overseas territories or other UK mints?

I feel that I would probably want to avoid things like these 1oz gold Krugerrands which are doing the rounds if they are not CGT exempt and may take you over a threshold in the future (say in several years when you may wish to realise thier value). It seems to make the most sense to stick with Britannias and sovereigns to avoid any misfortune.

https://www.royalmint.com/gold-price/capital-gains-tax-on-investments

Only UK coins made by the Royal Mint, past and present. 

Anything from overseas territories are not. Other UK Mints are not.

COINS ONLY

Bars from the Royal Mint are NOT CGT exempt.

Only coins.

 

[Kitalon]

23 hours ago, HonestMoneyGoldSilver said:

The CGT threshold has fallen from £12,300 to £6,000 to £3,000. You don't have to be a rocket scientist to see where it's heading - £0.

Do you really think that the government (or future governments) would totally remove the CGT threshold? It seems a bit disingenuous and could catch people out for longer term investments with non-CGT exempt stock. 🤔

[Bigmarc]

Is swapping gold for silver a taxable event?

[HonestMoneyGoldSilver]

3 hours ago, Kitalon said:

Do you really think that the government (or future governments) would totally remove the CGT threshold? It seems a bit disingenuous and could catch people out for longer term investments with non-CGT exempt stock. 🤔

The government is looking to stealth tax us at every turn. They've dramatically cut the CGT threshold while inflation was going crazy. It should have went up but instead they cut it in half, then cut it in half again. That's vindictive behaviour. I don't know what the government will do in future but their track record suggests it won't be good for us 😒

[SidS]

13 hours ago, BackyardBullion said:

Only UK coins made by the Royal Mint, past and present.

But only if they are STILL deemed Legal Tender iirc?

This is why post-1837 sovereigns are good to stack, but earlier sovereigns and guineas less so.

Happy to be proved wrong.

Edited January 8 by SidS

[MBTPSilver]

14 hours ago, Kitalon said:

Do you really think that the government (or future governments) would totally remove the CGT threshold? It seems a bit disingenuous and could catch people out for longer term investments with non-CGT exempt stock. 🤔

It's certainly possible, it's already been cut significantly in recent years. I think they could also remove the CGT exemption for coins at some point. At the moment it probably doesn't really register with the various Chancellors, but at some point they could quite easily notice it and decide they want more money.

[katyc]

I think they'll improve the CGT allowance again (eventually). People are less inclined to invest if there's a low CGT threshold, which is never good for an economy - they need cash flowing - so that people have gains to spend keeps the economy flowing. I think they bought this cut in partly as a quick tax grab - it was perfect for them while inflation (hence prices) are high. But they also knew it would help slow inflation (less people are now inclined to sell for the next year or two - which will aid in calming inflation). I may be completely wrong, but that's a way of looking at it anyway.

There is talk of significant changes coming this budget for Inheritance Tax also (either lifting the limit or even removing it completely). I'm very surprised to be honest (surely the "Death Tax" is their favourite vile tax grab?). But, if people are more inclined to pass down their riches earlier in life then I guess the recipients are likely to enjoy it (spend it) which is good for the economy (and the tax man's pockets). Others will go the opposite end of the scale and not pass any down (know no tax would be due). But that means they'd be inclined to invest even more and grow their wealth (also good for the economy).

One thing is guaranteed though; we will always be robbed one way or another by whichever turd is in power.

 

Edited January 8 by katyc

[katyc]

I'm still very bitter about dividend tax; £500 allowance from 6th April. What a joke! Also Corporation Tax is up. They keep giving benefits to people on payroll (well, they're not really benefits as everyone is still worse off) - but nothing to Directors. How are entrepreneurs going to be encouraged to create more businesses and jobs with zero incentive apart from increased taxes?

During covid, if I was on a payroll I'd have received minimum 80% full pay to not work. Self employed also could claim. Directors of companies, however, were expected to top up the remaining 20% pay and were not given a penny from the gov even if we had to close the business. Oh, hang on - that's right - we could have a loan.... A loan that we pay back..... with interest!

And then they wonder why the very wealthy have left the UK over the last few years?! 

I've just realised that I have turned this thread in to an excuse to rant... Sorry 😬

[katyc]

12 hours ago, Bigmarc said:

Is swapping gold for silver a taxable event?

Great question. I would be interested to see how swaps are perceived and what the rules are.

Edited January 8 by katyc

[Coverte]

7 minutes ago, katyc said:

Great question. I would be interested to see how swaps are perceived and what the rules are.

Technically, you just need to generate 2 invoices/receipts; one for the sale of the CGT free silver, then one of almost identical value for the CGT gold being 'bought'

 OR - the reverse if the trade is  buying CGT silver with CGT gold.

Generally best to have a very minor difference between the 2 invoices - avoids the potential for more in depth interest/scrutiny.

[HonestMoneyGoldSilver]

6 minutes ago, Coverte said:

Technically, you just need to generate 2 invoices/receipts; one for the sale of the CGT free silver, then one of almost identical value for the CGT gold being 'bought'

 OR - the reverse if the trade is  buying CGT silver with CGT gold.

Generally best to have a very minor difference between the 2 invoices - avoids the potential for more in depth interest/scrutiny.

I should change my signature to "Not a tax professional, the following is not professional tax advice"

I think what you said is right. As a private individual you can swap CGT and VAT-exempt gold for CGT and VAT-exempt secondary market silver and no taxable event has taken place. Under those circumstances it wouldn't matter if one side of the trade was imbalanced or if one or both parties made a profit

Change that to different types of non-CGT/VAT-exempt metals or do it as a business and things get a lot more complicated

[JohnA1]

On 07/01/2024 at 20:33, Kitalon said:

Do you really think that the government (or future governments) would totally remove the CGT threshold? It seems a bit disingenuous and could catch people out for longer term investments with non-CGT exempt stock. 🤔

They've introduced it, they keep altering it, nothing to stop them from removing it.

Also remember CGT-exempt coins are ultimately property of the Crown Corporation, since they make them. That's why they can call them in if they decree an 'emergency'

 

Individuals who value their privacy and meddling parasites act accordingly

Others are happy playing with the rules of someone else. Horses for courses..

Edited January 9 by JohnA1