With Rachel Reeves and Labour’s Autumn Budget due in October 2024, many concerns are being raised about their potential raid on capital gains tax (CGT). Labour has previously hinted at raising CGT rates to align them more closely with income tax, a move that could impact some investors significantly, particularly those with taxable gains from assets like stocks, property, or businesses. Many of the UK population are in fear of a large hike in tax liabilities, which has put the spotlight on gold as a potential safe, tax-free haven.
Labour’s potential tax reforms aim to address the substantial public financial deficit, estimated to be around £22 billion as reported by GT. The CGT tax reforms are likely to target those in the higher earning bracket, with estimations that CGT could rise as much as 39%. Under the current rules, CGT rates in the UK are 10% for basic-rate taxpayers and 20% for higher-rate taxpayers on most assets, with an additional 8% on gains from residential property.
One strategy to mitigate the impact of these changes is to utilize available CGT allowances. Each individual currently has a CGT-free allowance (£3,000 in 2024/25), which can be doubled if assets are transferred between spouses. Utilizing this exemption bracket before any potential hikes in CGT rates could be crucial for investors looking to minimize their tax liability.
Gold has long had the reputation of being a safe-haven asset, and this has been reinforced in 2024. The price of gold has soared to record levels, hitting an all-time high of £2,035.71 per ounce in October 2024. This price surge has been driven by a combination of global economic uncertainty, ongoing geopolitical tensions, and a recalibration of the Federal Reserve interest rate expectations. Investors often rush to gold during periods of instability, and the current global economic climate has been no exception.
For UK investors, gold offers a hedge against inflation, currency devaluation, and substantial tax advantages. Certain gold products, like Royal Mint Sovereign coins and Gold Britannia coins, are exempt from Capital Gains Tax in the UK. This exemption makes gold particularly appealing for those concerned about Labour’s potential tax hikes, as it allows them to benefit from gold’s consistent price appreciation without incurring additional tax liabilities.
The price of gold has been on a remarkable upward trajectory through 2024, driven by several key factors. While gold has seen minor corrections on its way up, many analysts suggest that the long-term price predictions are bullish due to the continued demand for safe-haven assets.
The October 2024 price peak for gold represents a new high for the precious metal, surpassing all previous records set earlier in the year. This surge in gold price is a clear reflection of investor sentiment, with many turning to gold as a store of wealth amid fears of currency devaluation and market instability.
The confidence around the gold price, its historic performance over the decades, and its CGT exemption on Royal Mint coins, makes them an excellent choice for UK investors.
For those looking to protect their wealth from potential CGT increases, gold provides a dual advantage, with its protection from inflation and exemption from CGT on certain products. By holding physical gold in the form of coins or bullion, investors can avoid the gains that trigger CGT liability.
In the UK, only certain gold items are exempt from CGT:
For those looking to reallocate funds into gold bullion, it’s also important to consider safe storage and insurance implications for holding physical gold.
In light of the anticipated CGT changes under Labour’s Autumn Budget, it is essential for investors to plan accordingly and to make moves based on factual information and not potential rumours. The soaring price of gold in 2024, coupled with its CGT exemption, makes it a compelling option for those looking to safeguard their wealth, even if the new Labour government does announce changes to CGT. Whether through physical gold or gold-related financial products, this precious metal offers a practical and tax-efficient strategy for weathering the uncertainty of 2024 and beyond. Choose Cheshire Gold Xchange, if you are looking to buy physical gold.
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