Investors have found the white metal alluring for some time now. Due to the potential to make significant gains once prices rise, the popularity of silver is gaining ground. The gold-silver ratio has widened considerably and silver is now more than 100 times cheaper than gold. Investment options and silver include bars of varying sizes and a variety of choice in coins.
There are important differences in buying bars and coins. These include considerations of important investment factors like divisibility, value, variety and liquidity. In this article, we will explore these differences and understand whether it is prudent to invest in silver coins or bars.
Coins offer distinct advantages
Coins are usually a better bet for investment for a couple of reasons. They offer far better divisibility than owning large silver bars, providing flexibility to sell small amounts. If the coins have a face value, it may be possible to buy them VAT-free, and if living in the country of issue, they can also be Capital Gains Tax-free. Bars can be slightly cheaper due to lower production cost, but quantity discounts are achievable when buying lots of coins.
It is interesting to know that silver coins are available in 10 ounces and 1 kg versions. One of the compelling reasons for the popularity of silver bars is that they carry lower production costs. This offers investors the opportunity to acquire more silver for their money. However, large coins are almost similar to investing in bars. Additionally, these coins are tax-efficient if they have a face value.
The importance of divisibility
Investing in a variety of smaller coins will enable the investor to spread the value of the investments. This is an important factor as it allows you to take advantage of different price points when the market is good. Investing in a large bar gives you that one opportunity to sell, while smaller coins can be sold bit by bit to maximise profits.
Silver bars can offer greater value
The experience of purchasing a large silver bar is altogether different from acquiring coins. There are large bars available that weigh 1 kg or 5 kg, and they offer an excellent opportunity to acquire more silver at a cheaper price per gram. This is simply because silver bars carry lower production costs and design costs. If the purpose of your investment is simply to acquire a larger amount of silver at cheaper prices, then bars could be the right choice for you. However, you need to bear in mind that large silver bars do not tick the boxes for divisibility, variety and tax efficiency.
Tax-efficient investments in silver
Unlike gold, 20% VAT is payable on all silver bars and coins. Needless to say, this escalates your purchase price and eats into your profit margins. However, there is a way to acquire VAT free silver. Physical Gold, a well-known precious metals dealer in the country offers VAT free silver. The company has made this possible by routing their products via another location in Europe and ensuring that the silver bars carry a face value. Upon fulfilling both these conditions, the silver becomes VAT free in the UK.
Silver coins that carry a face value, on the other hand, is recognised as legal tender in the country. Therefore, they can be acquired CGT free. While you may end up paying VAT when buying these coins, the profits you make when selling them are tax-free up to a level of £ 12,000 in a single tax year. It is important to be aware of these tax implications when investing in silver to make the right choices when building your portfolio.
Call our silver experts to get the right advice before buying