Sales of tax-exempt gold and silver coins have surged by 14% from April to June this year, according to The Royal Mint. This development comes as investors brace for potential tax hikes under a Labour government, following the call for a general election by former Prime Minister Rishi Sunak.
The Royal Mint has reported its largest bullion order to date, worth millions, received in May. This uptick in demand is attributed to wealthy investors seeking to capitalise on the tax-exempt status of gold and silver coins, which are classified as legal tender and thus remain free from capital gains tax. For instance, an investor can avoid a £1,400 tax liability on a £10,000 profit from these coins.
Rachel Reeves, Labour’s shadow chancellor, confirmed on Tuesday that the party plans to raise taxes in its first Budget this autumn. While she specifically ruled out increases for ‘working people,’ experts believe capital gains tax will be targeted instead. Peter Walden of BullionByPost has observed a notable rise in interest from wealthy investors aiming to leverage the tax exemption. ‘We have seen a number of high net worth investors spending over £100,000 on capital gains tax-exempt gold coins pre-emptively,’ he stated. ‘As Labour firm up their plans for capital gains tax, we anticipate a rise in interest as investors review and adjust their portfolios in response to the changes.’
The reduction of the tax-free allowance to £3,000 in April has already resulted in more investors facing capital gains tax liabilities this year. Presently, higher rate taxpayers incur a 24% tax on property sales and a 20% tax on other assets, while basic rate taxpayers face rates of 18% and 10%, respectively. Ms Reeves is reportedly considering aligning these rates with income tax rates to bolster Treasury revenues.
Safe-haven assets like gold have seen a considerable rise in demand due to rampant inflation and economic uncertainties. Sales of gold coins increased by 9% year-on-year in the first quarter, while silver coin sales soared by 55%, as reported by The Royal Mint. Rob Morgan of wealth management firm Charles Stanley commented, ‘Paper currencies lose their value over time as more money is created. The supply of gold and other precious metals, meanwhile, is strictly limited, and expensive investment is necessary to discover and extract more.’
Morgan further elaborated on the geopolitical factors influencing this trend. ‘The renewed popularity of gold is linked to the trend of deglobalisation and heightened international tensions as central banks increasingly crave a non-politicised reserve asset. As the world continues to fragment geopolitically, this trend could continue,’ he added.
The surge in sales of tax-exempt gold and silver coins underscores the heightened alertness among investors as they prepare for potential fiscal changes under a Labour government. As tax policies evolve, the demand for secure investment options appears poised to increase, reflecting broader economic and geopolitical anxieties.
