Tax year end: Is Gold the tax-free investment you’re looking for?

tax-free investment

Tax-Free Investments are flavour of the month

As the tax year end approaches and we all give thought to our financial position, many of us wish that we could have perhaps focussed more on tax-free investment. If you’re considering moving money around to reduce your tax exposure, here’s a list of tax considerations worth reviewing before you commit.

Related – How does the Budget affect investments in gold?

Remember: Your ISA is a limited tax-free investment

ISAs continue to be a popular savings vehicle, but remember, there’s a limit to how much you can save. From April, that limit will be £20,000 and once you’ve reached your limit, that’s it! You can’t roll any unused portion on to the next year.

You’ll be taxed on your regular savings accounts

For any savings not held in ISAs or other tax efficient wrappers, you’ll be charged income tax on any income those savings generate. So, if you’ve already contributed the maximum allowance to your ISA and you’re considering placing residual funds into regular savings, it might be wise to reconsider. With interest rates at all-time lows, this means very low returns on traditional savings!

Funding the future with an asset sale? Getting rid of a Buy-to-Let property? Beware CGT!

If you’re looking to sell an asset, whether this tax year or next, it’s worth knowing that you may be at risk of paying Capital Gains Tax on the profits of that sale. Once you’ve hit your annual Capital Gains allowance, through the sale of a Buy-to-Let property for example, you’ll be due to pay CGT on any further profit over and above that allowance.

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For this reason, you might consider selling off assets strategically, to avoid breaching this threshold. For example if you’ve already profited from selling shares in this tax year, you may wish to postpone the sale of additional assets until the next tax year, thus utilising both years’ allowances. If you are a fan of property, for future investment options, you may wish to consider Gold rather than property.

Saving into your pension is good… unless you hit the lifetime allowance

The lifetime allowance is the amount which you can save into your pension without incurring further taxation. For the coming tax year (starting on 6th April), it’s being reduced to £1 million, down from £1.25 million. That sounds like a lot, but saving throughout your whole working life, means many people will reach this limit.

The no CGT, no VAT, no limit alternative? Gold, of course!

Gold has always been an attractive investment because of the balance it provides to a portfolio, and because it can be a tax-free investment. Unlike ISAs, there’s no limit to how much gold you can buy in any tax year.

If you sell UK gold coins, you won’t pay CGT, because they’re technically legal tender and therefore not taxable. And because gold is held for capital appreciation, rather than used to generate an income, there’s no income tax to pay either. If you’ve got room in your pension before you get to the lifetime allowance, you can add gold to your SIPP. And, as an added bonus, there’s no VAT to pay on gold purchases. Another 20% saved from the tax man!

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