Investing in gold coins – what are the other tax-free ways to invest in bullion?

The popularity of gold and gold coins for investment has surged recently as investors and central banks increasingly turned to bullion as a reliable long-term store of value. 

Typically, an ounce of gold buys as much, sometimes more, of life’s staples such as food, clothing or shelter as it did decades or even centuries ago. Although often volatile in the short term, gold has retained its purchasing power over longer timeframes, which cannot be said for most national currencies which tend to gradually devalue over time.

Gold is hard to find and expensive extract from the earth, so the supply is limited. Whereas, the supply of pounds, dollars, euros and other currencies expands as more are created. 

Although gold is not a productive investment like shares or property – which generally provide higher returns and produce income – it can be expected to preserve wealth against the ravages of inflation over time.

Options for investment in gold

The permanence of gold is prized by those seeking to preserve the value of their wealth, as well as investors who see it as diversification from other traditional asset classes like shares and bonds. The gold price normally performs well in a crisis, so it can be a valuable part of a portfolio during a market downturn. 

However, it’s important to acknowledge that it can be dead weight for extended periods while other assets march forwards. Therefore, investors should look to limit exposure – especially for those looking for significant growth.

If you decided to allocate some of your portfolio to gold, there are several options available. It’s possible to buy gold coins such as gold sovereigns or gold bars, or you can invest in a fund that owns bullion which effectively allows you to buy and sell gold as an investment traded on the stock market.

Find out more: Should you invest in gold?

Investing in gold coins and other tax-free strategies

As a UK taxpayer, if you make a profit from buying and then selling gold then you will normally be subject to capital gains tax (CGT).

Broadly, this means if your realised total profit in a tax year is more than the annual CGT allowance – currently £3,000 for the 2025/26 tax year – then you must pay 18% or 24% tax on the gains over that threshold, depending on whether you are a basic rate or higher rate taxpayer.

Find out more: What is Capital Gains Tax?

However, there are some ways to invest in gold exempt from capital gains tax:

1. Gold bullion coins are free from capital gains tax due to their status as legal tender in the UK. However, you’ll have to store and appropriately insure them or use a company that does this for you. Other bullion products are, however, not tax free.
2. Perhaps a more convenient method of buying and selling gold tax free is to use an Exchange Traded Commodity (ETC), traded as a share on the London Stock Exchange, within a Stocks & Shares ISA – or Individual Savings Account. In this account all profits are tax free.
3. Similarly, a gold ETC can be purchased in a SIPP – or Self Invested Personal Pension – a flexible type of pension account that allows you to buy a wide range of investments. Profits are tax free, and you even get tax relief on money you put in. However, you pay income tax on withdrawals from a pension beyond the first 25% usually under current rules.

What is a gold ETC?

An exchange traded commodity (ETC) is a convenient way for investors to gain exposure to a single, or basket of, commodities such as gold, oil and currencies. They are listed on the stock market and can be traded in real time during market hours. 

There are two general types of ETC: physical and synthetic. Physically-backed ETCs own gold bullion stored securely in a vault, whereas synthetic ETCs use financial instruments called derivatives, usually in the form of a ‘swap’, to replicate the gold price. This is where the ETC enters into a contractual agreement with another financial business, known as a ‘counterparty’ who agrees to pay the return generated by the asset minus a fee. Although this can bring a small risk the counterparty can’t honour its commitment in full, synthetic products can offer lower fees.

There are also ETC options for investing in other precious metals such as silver and platinum, but as with gold ETCs always read the documentation, including the Key Investor Information Document (KIID), carefully to ensure you understand the product before investing.

Read more: Five tips for investing in gold, silver and other commodities

Is gold a tax-free investment?

We’ve discussed liability to capital gains tax, but what about other taxes? Gold produces no income so there is no liability to income tax, and while there used to be VAT applied to purchases of gold bullion and coins they are now VAT free too as they are considered investments – along with gold funds and ETCs. 

Investors that wish to pass their gold to loved ones after they pass away should note the usual inheritance tax (IHT) rules apply to gold bullion and coins, as well as gold ETCs held in ISAs or general investment accounts. In addition, pension pots – containing gold funds or any other assets – are set to be included in estate calculations for IHT purposes from April 2027.