skip to main content

Our Guide to Buying Gold Bars vs Gold Coins

The gold bar is instantly recognised worldwide as a symbol of wealth, status and security. For those with the wherewithal to invest in gold bullion, it may seem an automatic choice for their investment. But pause a moment – because buying gold coins instead may suit your purpose better.

There's more to the investing in gold bars vs gold coins decision than straightforward personal preference: you will need to consider aspects such as your gold investment strategy, capital gains tax implications and what might represent the better deal when you come to sell your gold.

What do you want from your gold bullion investment?

The most common answer to this question is usually "a secure investment that will give me a good return when I decide to sell it." When world markets are volatile, investors always look to precious metals, and particularly gold. Even so, it's worth remembering that the value of anything is what you receive when you sell it, and gold bullion is no exception.

So which type of gold bullion will be easier to sell – gold bars or gold coins? You will always be able to sell either, but when you choose to do so will be dictated by your strategy. If you are a major, long-term investor and can afford to buy multiple, large 1kg gold bars and store them away indefinitely, then you have the luxury of timing your gold sale when prices for gold are at their highest. Or if gold prices are slightly depressed when you want to sell, you have the flexibility of selling just some of your 1kg gold bars and keeping the rest until the market improves.

Bear in mind though, that we are talking about considerable sums of money for multiple 1kg gold bars! As we'll now explain, for a truly flexible gold investment strategy, you'd be advised to look at smaller gold bars or gold coins.

More flexible ways to invest in gold

Many cannot justify the very substantial outlay required for multiple 1kg gold bars. Rather than buying just one 1kg bar and be tied to selling only when gold prices are high (or else lose value on your investment), it would be better to invest in multiples of more affordable gold bullion.

This could well be smaller gold bars. There are available in a range of sizes from 1g upwards, including 2.5g, 5g, 10g, 20g and 50g, and buying several of these smaller gold bars would give you more choice in how you manage your gold bullion investment strategy. For example, if you want funds quickly when gold prices are relatively low, you could sell just enough of your small gold bars to raise the cash you want, whilst keeping the rest until the market is more buoyant.

You could enjoy equal flexibility, plus other benefits, by investing in gold coins. There are many different types of gold coins available, with a wide range of prices. South African 1/10 Krugerrands are probably the most affordable, making them popular with first-time and entry-level investors, then there are the various Gold Sovereigns and Gold Britannias from the UK's Royal Mint. These have specific advantages, which we explain below.

Tax on bullion

All gold bars and coins are VAT exempt. However, gold bars are subject to Capital Gains Tax (CGT). This means any gains you make from selling your gold bars will count towards your Capital Gains Tax personal allowance, which under current UK tax rules is £12,300.

Since other sales you may make, e.g. shares, antiques or a second home are also liable for CGT, you could easily use up your CGT personal allowance and then have to pay for tax on your gold. This will be at an increased rate if you are a higher or additional rate taxpayer.

So whilst having several smaller gold bars gives you more flexibility, be mindful that selling several of them during a single tax year could potentially see you paying CGT, thereby devaluing your investment.

Can you avoid paying Capital Gains Tax (CGT) on gold bullion?

Fortunately, the answer is yes. Although they are gold bullion, HMRC gold rules state that British gold coins do not attract Capital Gains Tax because they are sterling currency. All sterling currency is exempt from CGT.

This gives UK gold coins the significant advantage that you can sell any amount of them, and not be liable for CGT on the profits. Bear in mind though that this only applies to UK gold coins as they are sterling currency. Your South African Krugerrands are not sterling currency, so they will be counted as CGT chargeable assets.

Paying premiums on gold investments

Before we move on to look at the other advantages of investing in gold coins, we need to consider the thorny issue of premiums.

It's true that, in percentage terms, you'll pay a lower premium if you buy gold bars. By premium, we mean the extra charge that results from the cost of manufacturing, order processing and packing, delivery and insurance. As a 1kg gold bar is a large single item, the premium you'll pay the bullion dealer, as a percentage of its overall price, is relatively small.

However, this benefit starts to diminish if you're buying multiple smaller gold bars, such as several 1g or 5g bars, to benefit from greater flexibility on your gold investment. The order processing and packing elements will increase incrementally as you buy more bars, thereby accounting for a larger percentage of the overall price.

At this point, there'll be a smaller difference in the premium you for gold bars vs gold coins. So your viewpoint on premiums really depends on your gold investment strategy: the more individual bars or coins you buy, the less difference there is.

Collectable gold investments

Which would we recommend – do you invest in gold bars or invest in gold coins? Either should hold their value and be a better alternative to savings or investment accounts, which are at the mercy of financial market fluctuations. With gold bars, their value is in the gold itself, and that will only ever change as gold prices change.

Gold coins, however, are minted in specific types, such as Gold Sovereigns and Gold Britannias and in limited numbers, usually with a single issue each year. There are also different categories of coin for each issue, such as Proof and Uncirculated.

All these variations confer rarity on certain coins, and that in turn increases their value. It also adds to their appeal; some gold coin collectors (known as numismatists) do it as much for their interest in a particular type and issue of coin, as they do for the monetary value. Incidentally, we are a full member of the BNTA - The British Numismatic Trade Association.

You might consider the variations in value of gold coins as a risk; at least a gold bar has its weight and purity engraved on it. However, the trend in gold coin values is always most likely to be upwards, and rarity will accelerate that trend. A gold bar is a straightforward gold investment, whereas a gold coin that can also be valued for its rarity and cultural history.

Buying gold coins for investment

There are many valuable gold coins you could buy. Some may be antique, centuries old and fascinating. Others may be exotic, from distant countries. There is also a remarkable range of UK currency coins struck in 22 carat gold proof versions, across several years. All denominations are available, from £1 and 50p coins down to 1p coins, and due to their strictly limited editions they have great appeal.

Whilst they are all undoubtedly attractive, if your primary aim is to invest in gold coins, you would do best to focus on UK Sterling gold coins. This is because, as we've already mentioned, they are the only investment gold bullion coins that are exempt from both VAT and Capital Gains Tax.

Every year sees new versions minted of the Gold Sovereign and Gold Britannia, so you can quickly build up a varied and tax-efficient UK gold coin collection. Serious collectors will look to complete particular sets, helping many coins increase in value – in addition to the rise in gold prices.

Gold Sovereigns and Gold Britannias are of known, trusted provenance and available in different sizes and weights, to suit your spending limits and gold investment plans.

Safely storing gold bullion

Obviously you want your investment to be a secure as possible, not only in monetary terms but also physically. If you are buying multiple 1kg gold bars, you will probably want to place them in secure insured vaults.

The alternative is to store your gold bullion at home, which is much easier with smaller gold bars or gold coins. Your gold bars or coins will be more accessible to you, but potentially more accessible to intruders too, so you'll need to think carefully and creatively about storing your gold. A safe may be difficult and time-consuming for thieves to break into, but it's a rather obvious target – even if hidden behind a picture! Splitting your bullion and secreting it in other, more imaginative locations around the house could prevent robbers getting away with all of your gold; hopefully none of it!

If you decide to go down this route, then the fewer people who know about it the better; an overhead indiscreet conversation could lead to you being targeted by thieves. Above all, if you are storing gold bullion at home, you should seriously consider insuring it.

To cover its market value, you will almost certainly have to declare it separately on your home insurance policy. Some investors don't like to insure gold stored at home, fearing a possible unscrupulous individual from their insurers may alert potential thieves to its presence. That may seem unlikely, but only you can decide.

Choosing gold bars or gold coins

Which should you choose – gold bars or gold coins? Both have their attractions; for example, as gold investments they are exempt from VAT. Gold bars have their weight stamped on them, and you can ascertain the current price for gold at any time. However, their actual value when you sell them will depend on the best price you can get from a gold bullion dealer.

The same applies for gold coins, but they have two distinct advantages. One is that in addition to their intrinsic gold value, their collectable appeal will potentially increase their sale price. The second benefit of making an investment in gold coins, is that by choosing UK Sterling (i.e. Gold Sovereigns and Gold Britannias), you are exempt from Capital Gains Tax – a bonus that gold bars cannot offer.

Ultimately, you may want to 'hedge your bets' and choose to spread your investment across both gold bars and gold coins, although this makes assessing the overall worth of your gold assets rather more complicated. If you are seeking a more straightforward option with reduced tax liabilities or have limited funds to invest, we would recommend putting your money into gold coins. It should not only lead to satisfying returns, but could also be the start of an absorbing collectable gold coins hobby.

Frequently Asked Questions

Yes, gold is generally a reliable investment, which is why it’s so sought-after, especially at times of financial crisis.

Usually yes, to cover the extra production costs and their collectable value.

Assuming they have the same gold content, you are more likely to get a higher price for a gold coin. The value of a gold bar is purely in its gold content, whilst the price paid for a gold coin will reflect both its gold content and its potential collectable value.

Generally, no. Their value is determined solely by their weight. Of course, there are exceptions and certain gold bars do carry a premium due to their age or rarity. Unless you have in-depth experience in collectable bars we would suggest you avoid such items.

Yes, provided they meet HMRC tax rules, which most do.

Capital Gains Tax is payable on gold bars, but not on UK currency coins. These include Gold Sovereigns and Gold Britannias, and some other collectable gold coins from the Royal Mint.

Small gold bars (from 1g upwards) and gold coins are equally easy to store in terms of their size, and can be spread across different locations to aid security. 1kg gold bars are not difficult to store in terms of size, but if the bar is stolen you lose a very large investment in one go.

If you store them in a bullion vault, insurance cover may be included in the cost. If you store at home, the risk of theft may be greater. Insurance would be wise, though some people think this increases the risk if an unscrupulous employee reveals the gold’s location to thieves.