Physical Gold Taxes: US 28% Collectibles vs UK CGT-Exempt Britannias

Two investors in identical gold positions can keep wildly different fractions of their gains depending on which side of the Atlantic they live on. Tax treatment is one of the most consequential and least discussed aspects of precious-metals investing.

The US treatment: 28% collectibles rate

The IRS classifies physical gold (bars, coins, ETFs holding physical metal) as a collectible under IRC Section 408(m). Long-term capital gains on collectibles are taxed at a maximum of 28%, not the 20% rate that applies to stocks and bonds. Short-term gains (held under one year) are taxed at ordinary income rates, same as any other asset.

• Held >1 year: 28% maximum federal rate (state taxes additional)
• Held <1 year: ordinary income rates up to 37%
• Applies to physical bullion, GLD, IAU, SLV, PALL
• Does NOT apply to gold mining stocks (regular 20% LTCG)
• Does NOT apply to PHYS (passive foreign investment company)

The UK treatment: full CGT exemption for legal tender coins

The UK exempts British legal tender coins from Capital Gains Tax entirely. The Sovereign and the Britannia (and a handful of other Royal Mint products) qualify. Sales of any quantity, at any profit, generate zero CGT liability.

• Britannia (any size): 100% CGT-exempt
• Sovereign (any vintage post-1837): 100% CGT-exempt
• The Queen's Beasts series: exempt
• Krugerrand, Eagle, Maple Leaf: NOT exempt, taxed at 20% CGT (24% for higher-rate)
• Gold bars: NOT exempt, fully taxable

"For a UK higher-rate taxpayer, switching from Krugerrands to Britannias is a 24-percentage-point return enhancement. Nothing else in personal finance comes close to that delta." - Hargreaves Lansdown analyst note

VAT (sales tax)

Investment-grade gold is VAT-exempt across the EU and UK (the so-called "investment gold" exemption under Article 344-347 of the VAT Directive). Silver, platinum, and palladium are VAT-applicable in most EU countries (typically 19-25%), which is why European investors heavily prefer gold over silver for bulk holdings. The US has no federal VAT, but several states impose sales tax on bullion under specific thresholds.

The Roth IRA workaround

US investors can avoid the 28% rate by holding gold ETFs in a Roth IRA or traditional IRA. Distributions from a Roth IRA are tax-free, and traditional IRA distributions are taxed as ordinary income (which can be lower than 28% in retirement). This is the cleanest tax-efficient gold strategy for US investors who are not interested in physical custody.

Reporting thresholds

The IRS requires Form 1099-B reporting for sales above specific thresholds. Cash transactions over $10,000 trigger Form 8300 reporting. Most retail dealers report all sales of certain coins (Krugerrands, Maple Leafs in 25-coin lots, gold bars over 1kg) regardless of size. There is no "under the radar" gold transaction at retail scale.

Practical structuring

For US investors: hold long-term gold in a Roth IRA to escape the 28% rate, use IAU/GLDM for the lowest expense ratio, and only buy physical bullion outside an IRA if you specifically want custody-free metal. For UK investors: buy Britannias and Sovereigns exclusively unless you have a specific reason not to. The CGT exemption is too valuable to pass up.

Bottom line: Tax treatment can swing precious-metals returns by 20-28 percentage points over a multi-decade hold. Structure first, then buy metal.