Gold vs ISAs
Free & fully insured UK Delivery. Learn more
Secure & flexible payments. Learn more
Buyback Guarantee Learn more
Individual Savings Accounts (ISAs) provide a tax-free savings and investment vehicle allowing UK individuals to allocate a limited amount of money every year.. Any returns made on this money are protected from taxation, including Capital Gains, Income and Dividends.
It’s essential to be aware of varying investment risks as an investor so you know what to look out for and how to create a diverse portfolio that takes the appropriate amount of risk.
ISAs are popular as they can be set up relatively easily and offer the average investor a way to invest tax efficiently. These accounts will be opened through a bank or building society.
However, other financial institutions could be on hand to provide an alternative. For example, you could work with a private fund manager who makes investment decisions for you.
The different types of ISA for your investment are:
By far the most popular type of ISA is the cash option. These have the highest deposit limits per annum, are secured by the FSCS, and, if you choose the right one you’ll be able to withdraw without penalty
Even though overall, for most serious investors, we would recommend owning gold as part of your portfolio, that doesn’t mean that there aren’t benefits attached to using an ISA.
For those looking for an extremely low risk way to invest money, then there aren’t many better alternatives. Some benefits of investing via an ISA are:
There is also a certain amount of flexibility when it comes to ISAs, as there are a number of different types, depending on your investment needs.
What Is Gold
Gold is a malleable precious metal with a long history as a secure store of value. It has been used for 1000s of years as a form of payment, and even today there are types of gold that are classed as legal tender.
You can get started with gold investments in a number of ways, not all of them involving the purchase of physical gold. These include:
While there are benefits for investing in an ISA, such as the security, the fact is that the potential upside is far lower than gold. Gold has also shown to be an extremely secure investment, as looking at the historical spot price will show.
There are several reasons why gold is a great investment, especially when compared to ISAs:
For investors looking to make secure gains at a rate higher than a traditional cash ISA with less exposure to inflation and interest rates, gold could be an ideal choice.
When you consider the performance of both of these over time, gold has consistently outperformed ISA’s.
If you consider a £20,000 investment made in the year 2000, at the end of the year 2022 that would have been worth:
ISA returns are related to the markets and official interest rates, which have been really low over recent years, affecting ROI. There is also the fact that Cash ISAs aren’t a good hedge against inflation as they always pay a lower rate than inflation (an effective decrease in the value of money) Gold is well-known for outperforming inflation over the medium to long term.
Gold has increased in value at a much larger rate throughout the 21st century, and has been hands down a better investment during that time.
ISAs can lack a huge amount of the flexibility of gold. You will often find with an ISA that there are limits on how much you can invest and withdraw over a specific period. Not only that, but there are usually some severe penalties on the money you hold should you decide to liquidate your ISA before your agreed term. This is particularly relevant on fixed return ISAs.
Gold, on the other hand, carries none of these limitations. There are no caps on how much or how little physical gold you can buy, and there is always a willing market with no penalties should the time come to sell your gold investments.
There is no doubt that there are less restrictions and penalties if you choose to invest in gold over ISAs.
Insider tips and guidance to maximise your gold returns
ISAs and gold both carry with them great tax benefits for your money. Whether investing in an ISA or gold coins you’ll find ways that both can be free of VAT, Capital Gains Tax and income tax. It is however worth bearing in mind that some other gold purchases, such as gold bars, could be liable for Capital Gains Tax, so it’s always best to do your research or speak to an advisor in that regard.
It’s helpful to know that an ISA allowance is put in place to limit the amount that can be deposited. In the UK, this is set at £20,000 for ISAs.
Although the tax benefits are the same, it’s important to remember that there are no limits on the tax benefits for gold, and you have the ability to make significantly higher investments.
ISAs are designed to be a way to store value for a small amount of money, and the tax benefits for this reason are fine, although gold carries with it the same benefits without the restrictions.
While gold is known as the standard bearer for low volatility, Cash ISAs will always be considered less volatile.
This is due to cash ISAs being secured by the FSCS and providing consistent returns, meaning there is no risk at all to your initial investment with ISAs. Obviously, Equity ISAs can be extremely volatile and high risk, depending on the type of equities bought. Buying individual stocks in high risk sectors through an ISA is the most risky as performance is dependent on one company. It’s the classic case of all your eggs in one basket. Conversely, investing in equity funds through an ISA spreads the risk amongst a basket of stocks.
As secure as gold has proven to be over long investment horizons, technically your money is always at risk. Yes, when buying physical gold you will have a tangible asset for your money, but as with most investments it could lose significant value. There is no fixed or guaranteed return.
Downside risk is limited however, and there are also other benefits to owning gold over ISAs. Gold is a significantly better hedge against inflation and volatility in the markets.Gold’s value tends to rise the most during a weak economy. During such market downturns, investors tend to suffer losses on most other assets including equities and property values. Interest rates tend to fall in an attempt to stimulate the economy, so returns on bank savings (and Cash ISAs) also fall. Most investors will own a number of different assets, so holding gold compensates when other markets fall.
Cash ISAs are the less volatile investment in themselves, though with that comes less chance for meaningful gains. Gold has shown itself to be strong protection against negative market conditions and over time has proven very low in volatility itself, due to its huge market size.
Cash ISAs are the less volatile of the two, though gold has proven itself to be extremely low volatility over time and has a far higher upside.
There will be more additional fees with physical gold than with an ISA, mainly due to the fact you’ll have an actual product.
There are benefits to both ISAs and gold; however, history has shown us that gold has the greater upside, and can cater for a range of budgets, not just large investors.
You can buy directly from ourselves as one of the UK’s leading gold dealers, and we have made a number of tools available to you to help you take the next steps.
If you’re looking to buy gold coins or bars, we are a trusted and renowned broker :