Gold fever is gripping the market, and savvy investors are cashing in! With gold prices soaring nearly 58% in the last year, the world of coin collecting is experiencing a renaissance. But what makes these little metal discs so appealing? And why are they suddenly becoming a hot commodity for those looking to invest? Let's dive in.
Retail sales in the UK hit a three-year high last September, and collectible coins are riding this wave. One of the key advantages? Legal tender coins offer significant tax benefits that other gold products don't.
Take Harry Thorne, for example. He received coins from his grandfather, and by the time he was 21, he used them to help purchase his first property. His collection was worth enough for a £16,000 deposit on a flat. This firsthand experience inspired him to found the Bullion Club in 2022 to sell high-grade coins.
Here's where it gets interesting: When coins are minted by the Royal Mint, they become legal tender. For UK taxpayers, this means profits from selling these coins are exempt from capital gains tax.
Thorne explains that you could theoretically spend them like regular coins, but you'd be sacrificing their collectible value. This is a stark contrast to most bullion, such as gold bars, which are subject to capital gains tax. This tax advantage applies only to Royal Mint coins produced in South Wales.
Thorne's business has seen increased interest from investors feeling the pinch of recent capital gains tax changes.
In 2022, then-Chancellor Jeremy Hunt announced a phased reduction in the annual capital gains tax-free allowance, dropping from £12,300 to £6,000 the following year and then to £3,000, where it remains. Furthermore, Rachel Reeves increased capital gains tax rates, rising from 10% to 18% and from 20% to 24% for basic and higher-rate taxpayers, respectively.
As a result of these changes, Thorne's company's monthly turnover has skyrocketed from £150,000 to £1 million. Investors who bought coins a year ago have seen returns of approximately 50%.
Let's put this into perspective: An investor who put £10,000 into gold coins last year would be sitting on a £5,000 profit today. If that gain were in gold bars, the capital gains tax bill could be significant, depending on their tax bracket and if they've already used their annual allowance.
But here's the kicker: The condition of a coin is critical to its value. Coins are graded on a scale from 1 to 70, and these grades are key benchmarks for investors. Firms like Thorne's seal coins in tamper-proof cases to preserve their certified grade. Remove the casing, and the value drops. This allows investors to benefit from both the underlying spot price of the metal and the protected collectible premium.
The Royal Mint has reported a 102% year-on-year increase in sales of bullion coins on its website, with coins outperforming bars as investors seek tax-efficient options.
From 2016-21, the Royal Mint struck the Queen’s Beasts collection. A 2017 Dragon of Wales coin has delivered an annualized return of 26% since its issue; a graded, cased edition of the same coin has returned 44%.
Controversially, tax efficiency aside, coins possess a tangible appeal that's both personal and artistic. According to a Royal Mint survey, coins are the second most popular collectible in Britain after stamps, with over a third of respondents collecting them.
Much of this fascination stems from the rich history of gold and coinage. Since 1282, coins from the Royal Mint have been tested at the Trial of the Pyx, a ceremony that has changed little in nearly 800 years.
So, what do you think? Are you considering investing in collectible coins? Do you agree with the tax advantages, or do you see other factors as more important? Share your thoughts in the comments below!
