Covered in this UK silver buyers information guide:
- Buying VAT free silver Coins in the UK
- How you’re probably paying too much for your silver
- Why buying silver from VAT restricted dealers isn’t always the best idea
- What are the pro’s & cons of buying silver
- Where and how to re-sell your silver coins for the best prices
Information sharing disclaimer; CoinsUK share our own experience and opinions, we do not offer personal investment advice.
You’ve probably figured out that silver bullion has been an underpriced commodity, but how do you buy the precious metal at the best available price per ounce whilst minimising the VAT aspect of investing in silver bullion!?
Here’s my CoinsUK buyers guide to help you discover how the retail silver trade works and how you can get a price advantage buying silver bullion coins and bars vat freeAs a silver coin buyer myself, I have had those same frustrations “where to buy and sell silver bullion coins at the best price?”
Do you always pay VAT on buying silver coins in Britain? and when Is VAT charged for retail customers and the general public when buying silver bullion in the UK?
NO VAT is not automatically payable on all silver bullion purchases, it isn’t that silver attracts the VAT, it’s more a case that the larger retailers have to charge VAT on silver themselves, simply because they’re trading beyond a VAT threshold. Therefore the first thing we can do as retail buyers is shop around for coin dealers with smaller turn-over, perhaps part-time specialist silver re-sellers like CoinsUK, or directly from private coin collectors who are totally free to sell their own silver without charging any added tax. Different Countries within the European Union have their own VAT rates and rules, regardless of which you will only pay the vat tax once, in the Country of sale, although this may change post Brexit and the United Kingdoms departure from the EU.
The most cost effective method of buying physical silver coins is almost certainly buying from sellers who are not required to be UK vat registered.
Where to buy low cost VAT free investment silver bullion
This is the reason why many coin buyers choose to re-sell their own coin collections on auction sites like ebay and ebid (ebid generally has lower sales fees & hence can also be a good place to find an occasional silver bargain!) The slight downside with auction sites can be the sales commissions of up to 10% plus Paypal fee’s which can bump up the sales costs for collectors and silver stackers.
Tips – advice for buying & selling silver bullion coins and bars
How the coin trade pricing works; Silver coin retailers add a coin re-sale premium on top of the Mint production and resale premiums, on top of which 20% UK Vat is also added, unless the coins are being sold through a secondary market Margin scheme, in which case the tax is paid on the sellers profit margin.
Sourcing reasonable quantities of silver bullion from UK margin scheme sellers can be a time consuming challenge, especially at times of bullion price appreciation because there simply isn’t a lot of quality silver coins and bars coming onto the second hand market. Linking buyers directly with silver sellers on the secondary silver market is something I am actively engaged with to help silver investors find reputable sources for accumulating silver bullion at fair trade prices.
Why are the larger coin dealers & the UK Royal Mint so expensive to buy physical silver bullion coins from?
The simple answer is that A/ they have significant retail overheads to cover, typically larger premises to facilitate their staff, various taxes on premises, rates, insurances as well as staff and wage costs, pension contributions etc etc plus of course the need to make a higher profit to justify their capital allocations. Smaller coin dealers, rural shops, work from home specialist collectors and private sellers are typically able to trade much more nimbly with lower fixed costs and of-course often under the threshold for which we have to add in the UK Govs 20% VAT rate!
UK VAT free silver coins from the EU
In recent years there has also been a rise in European dealers who are selling silver bullion coins on a EU VAT margin scheme at a reduced VAT & tax rate. Reduced VAT Margin dealers can be worth exploring especially if you are looking to buy significantly large volumes of bulk priced silver bullion, which is often needed to justify the extra costs of shipping and insurance from Europe. You will also need to consider any foreign currency exchange rate costs, typically UK Pounds Sterling to Euro. There’s also still going to be some element of added tax, relevant to the overseas retailer plus their profit margins on the retail silver coins as well as any post Brexit tax implications.
Simple solutions to saving money when buying silver bullion coins in the UK
A/ Search out private sellers – and negotiate their best price – deal directly person to person.
B/ Find smaller retail sellers, shops and online coin sellers – who are reducing silver stock and can sell without VAT
C/ Consider negotiating larger orders at a fixed price and pay a deposit to lock the silver rate, which is something that I’m always happy to look at with on my own silver sales
Why is paying VAT on investment silver not a good idea for private buyers?
Simple – you’ll rarely be offered any of the 20% VAT element back when you come to re-sell your silver to a VAT registered bullion dealer or scrap merchant!
Do an online search of the larger coin retailers including The number 1, 2 and 3 silver retailers! They’ll all typically offer you the net silver spot price per ounce with at best a small premium of perhaps spot +1%, maybe very slightly higher if it’s a scarcer coin, if you’re lucky! No matter how coin dealers phrase their buy-back offers, it’s still a signifiant loss if you’ve paid a 20% tax on your purchase! i.e. A dealer might say something like ‘we pay 100% spot plus 1%’ – it sounds good right!! wow – we get the whole 100% plus an extra %! In reality – the 99% or 101% is simply based on the industry spot price, NOT the VAT inclusive price.
Private coin collectors, silver stackers or small trade buyers do not suffer this pricing limitation and are therefore free to offer lower priced silver when selling PLUS higher buy back prices when you come to re-sell.
Private silver buyers tend to pay a reasonable premium for good silver coins which will still typically mean that the coins are priced below a dealers vat inclusive price.
i.e – At CoinsUK I will often pay 10 to 25% above the spot silver price to re-buy certain silver coins, which equates to a fairer trade deal all-round, for both buyer and seller. Selling your silver coins privately will also enable you to find coin collectors who are paying a higher price per ounce simply because they’re buying direct and cutting out the middle-man as well as the dealer and tax.
Are the Britannia coins legal tender and CGT free? what’s the benefit of buying British Mint issued silver coins? CGT Free is great – so long as you actually make a gain on your silver investment!
The Britannia one ounce silver coin as minted by the UK Royal Mint is legal tender for it’s face value of £2 (two Pounds Sterling) Legal tenders true meaning is that the coinage can be used to pay debts or fines in a UK Court! It does not mean that banks, post offices or shops are obliged to accept these coins for payment. Likewise it does not mean that we can’t use the value contained within the precious metal of the coins to trade them ourselves for goods or services at their derived or intrinsic value should we wish to.
The face value of a Britannia 1oz coin is two Pounds, although the market value far exceeds this and is determined by; A/ The silver spot price plus a premium for production, mintage, delivery and selling costs. B/ The intrinsic value, or any premium assigned by the buyers perceived value.
Do CGT free silver coins make better coin investments? The UK Britannia coins legal tender nominal value means that the Britannia 1 ounce £2 silver bullion coins are CGT free, but what advantage is “Free of Capital Gains Tax” if any gain has already been wiped out by the high purchase cost in relation to a net VAT sales price, less sellers fee’s. Remember that to first benefit from any CGT advantage, you first have to make a gain!!
It is also worth exploring your own liability to Capital gains and current tax rules before you go rushing to simply buy British minted Britannia silver coins. If indeed you aren’t going to use your current CGT free allowance, you may well benefit more by buying coins with greater collector appeal as well as similar or lower premiums than the Britannia. Good examples of investment bullion coins include the newer South Africa Mint Krugerrand and the increasingly desirable more limited issue 1oz silver Dragon bars which are minted by the Perth Mint and are also authenticated legal tender coins with a $1 face value.
Generally speaking CGT free is not always a significant benefit, if any benefit at all! to UK buyers who would not be using up their current Capital gains tax free allowance. (always seek advice and do your own research if in doubt about your own tax situation)
There are increasingly vocal counter arguments to the UK Royal Mints assigned Legal tender status to certain coins and their counter move of giving coins with a much lower actual precious metals content – an actual higher ‘legal tender amount’ At face value coins like the £50 silver might look to be good value and many UK buyers have been fooled and annoyed to subsequently discover that no-one will actually accept these coins at face value! because they are not actually ‘circulating legal tender’ which is something the Royal Mint conveniently seem to omit from their sales promotions! A further downside is that the actual precious metal content – pure silver bullion is exactly the same as the £2 Britannia!
What looks the best value – a RM coin sold for £50 containing 1 ounce of silver or a £2 Face Value Britannia currently retail at under £20 each, also containing the same 1 ounce os silver!?
Silver certainly looks to be undervalued at mid 2019 prices with extreme gold to silver ratios, however it’s still important be do your research and aim to buy fair priced silver coins without added VAT and then look to establish a plan for re-selling the coins easily without dealer or sales commissions.
2020 Update note: World events are creating increased demand for sound money, physical silver and gold. At the same time as physical supply is being constrained by mine closures, delays getting ore to refiners as well as depleting wholesale bullion supply. In the case of the thinly traded silver market, we may well be moving towards a situation whereby silver bullion coinage simply isn’t available to wholesale or retail dealers. Trading coins p2p (person to person) might prove an even more attractive solution to acquiring silver. It might well prove the only solution!
UK silver coins benefiting from lower direct peer-to-peer re-sale costs; Pre-1920 .925 Sterling silver, Britannia collectable .958 silver coins, Britannia £2 1 ounce 999 silver bullion, Royal Coat of Arms 999 silver 2019 silver bullion coin.
Pre-owned and margin scheme secondary coin sellers: The British Government have a Margin scheme whereby dealers can re-sell coins that are not legal tender coins in the UK. Many non UK minted Legal Tender coins can be sold in the UK on the VAT margin scheme whereby the dealer will pay VAT on the profit margin, these types of coin sales are often good value, although at times hard to find in reasonable quantities! typical coins which we’d see come up for re-sales on a margin scheme include; USA American Eagles, Canadian Maple-Leafs, Kangaroos, legal tender 1oz coin bars, Mexican Libertad and more recently the limited issue Perth Mint Dragon $1 coin bars.
Finding dealers who will happily re-sell second hand silver on the UK margin scheme can be a good source of cheaper priced silver bullion coins and bars. In theory many of the UK Royal Mints silver bullion coins would not be applicable for the margin scheme since they are in fact classed as Legal Tender – i.e the UK Britannia is Two Pounds Sterling and Legal tender for the sum of £2 – all be it, non circulating. Having said that, the Britannia and coins like £5 Queen’s Beasts do still occasionally come up for sale on the reduced tax Margin scheme for secondary sale silver! Off-course if you buy your silver privately or from a dealer who isn’t required to be registered for charging VAT – you will not need to pay any VAT at all, not even the VAT on a profit margin, because VAT just won’t be applicable, that’s the significant benefit of buying silver from smaller retailers and private re-sellers.
Further reading; How to sell silver bullion and silver coin collections at a fair price
I hope you found the silver insights useful and if you have more interest in the silver trade I am always pleased to hear from you ‘Steve Hotson’ – you are welcome to get in touch anytime
CoinsUK does not offer professional investment advice or personal investment advice, and strongly encourages all readers to consult with their own personal financial advisors before making any investment decisions.
All content and opinions © Steve Hotson, CoinsUK, 2020