Inflation Proofing And Cgt

[horse]

Supose I bought 1 Kg of gold at todays current price of circa £11/gram. (£11,000)

1 gram of gold would buy me 11 loaves of bread assuming bread is £1 / loaf.

Fast forward a few years and assume we have undergone a period of runaway inflation.

Bread is now £50 a loaf!

However 1 gram of gold will still buy me 11 loaves of bread. (1gram of gold in now £550 / gram).

My kilo of gold bought for £11,000 is now worth £550,000!

Gordon want to charge me capital gains tax on my £539,000 "profit"

At 40% allowing for the 8K allowance this would be a bill of around £212,400.

But in reality I have made zero profit, the gold I bought a few years ago is still worth exactly what I paid for it ie 11,000 loaves of bread. However Gordon would have effectively stolen 4248 loaves of bread.

i.e. my £11,000 investment is now worth £6752 in real terms

Is there anyway to prevent being robbed by the govt. in this way?

I don't really want to start buying gold coins on ebay and storing them under my mattress

[slurms mackenzie]

Supose I bought 1 Kg of gold at todays current price of circa £11/gram. (£11,000)

1 gram of gold would buy me 11 loaves of bread assuming bread is £1 / loaf.

Fast forward a few years and assume we have undergone a period of runaway inflation.

Bread is now £50 a loaf!

However 1 gram of gold will still buy me 11 loaves of bread. (1gram of gold in now £550 / gram).

My kilo of gold bought for £11,000 is now worth £550,000!

Gordon want to charge me capital gains tax on my £539,000 "profit"

At 40% allowing for the 8K allowance this would be a bill of around £212,400.

But in reality I have made zero profit, the gold I bought a few years ago is still worth exactly what I paid for it ie 11,000 loaves of bread. However Gordon would have effectively stolen 4248 loaves of bread.

i.e. my £11,000 investment is now worth £6752 in real terms

Is there anyway to prevent being robbed by the govt. in this way?

I don't really want to start buying gold coins on ebay and storing them under my mattress

I see what you're getting at.

Are their thesholds for CGT ? Perhaps they'd be changed.

Think for example what would happen with income tax, all of a sudden even those on minimum wage would be higher rate tax earners.

[Unexpected]

Supose I bought 1 Kg of gold at todays current price of circa £11/gram. (£11,000)

1 gram of gold would buy me 11 loaves of bread assuming bread is £1 / loaf.

Fast forward a few years and assume we have undergone a period of runaway inflation.

Bread is now £50 a loaf!

However 1 gram of gold will still buy me 11 loaves of bread. (1gram of gold in now £550 / gram).

My kilo of gold bought for £11,000 is now worth £550,000!

Gordon want to charge me capital gains tax on my £539,000 "profit"

At 40% allowing for the 8K allowance this would be a bill of around £212,400.

But in reality I have made zero profit, the gold I bought a few years ago is still worth exactly what I paid for it ie 11,000 loaves of bread. However Gordon would have effectively stolen 4248 loaves of bread.

i.e. my £11,000 investment is now worth £6752 in real terms

Is there anyway to prevent being robbed by the govt. in this way?

I don't really want to start buying gold coins on ebay and storing them under my mattress

Thats a bloody good point. I bet not many of us thought of that.

Okay, then if we're faced with hyperinflation like that then maybe a house would be the best form of protection. Depends how much money you want to inflation proof. If it did start to run away and wages were going up 10/20% pa then I wouldnt hesitate to purchase a house, especially with the high interest rate and accompanying price drop. I also wouldnt hesitate to store gold under the mattress if it were only say 20k worth.

[AvidFan]

Is there anyway to prevent being robbed by the govt. in this way?

I don't really want to start buying gold coins on ebay and storing them under my mattress

There are I suppose two things Gold relies on if it is to succeed as a good hedge against inflation:

1. That Gold reacts quickly to inflation so you can sell up quickly and move back into interest yielding cash.

2. That Gold stays high so you can choose how much to cash in each year, thereby being able to avoid CGT.

Unfortunately, neither of these have historically been true - just look at the 1970s. Gold reacted after inflation had already run away and had violent peaks.

Those of us holding Gold are really relying on a devastating currency devaluation to get rich quick.

[Unexpected]

Will the government really know when we sell our gold?

If not, they wont be able to apply cgt to it.

This is not the type of information I will volunteer to them if i can get away with it.

[jonpo]

why don't you hold the gold as a tax free spreadbet on the price of gold ?

[Guest muttley]

why don't you hold the gold as a tax free spreadbet on the price of gold ?

I have a small spreadbet on gold. It avoids having to have a safe too.

[horse]

Will the government really know when we sell our gold?

I think brokers like goldmoney have to report transactions?

I have a small spreadbet on gold. It avoids having to have a safe too.

Haven't really looked into spreadbetting, how would you place a bet that would track gold prices?

[needle]

Thats a bloody good point. I bet not many of us thought of that.

Okay, then if we're faced with hyperinflation like that then maybe a house would be the best form of protection. Depends how much money you want to inflation proof. If it did start to run away and wages were going up 10/20% pa then I wouldnt hesitate to purchase a house, especially with the high interest rate and accompanying price drop. I also wouldnt hesitate to store gold under the mattress if it were only say 20k worth.

Yes it is indeed a very good point.

However if we are faced with hyperinflation, a house increases in value way, way faster than the tax threshold (stamp duty) on houses. Thus taxes would have to be paid here too.

It would take careful calculation to figure out which investment would be best.

Aside from that, you might actually be able to spend gold with out accruing taxes. Actually buying the aforementioned bread with gold, rather than selling it and buying bread, would be tax free surely?

[The Haunted]

I think brokers like goldmoney have to report transactions?

Haven't really looked into spreadbetting, how would you place a bet that would track gold prices?

I'm very new to this whole "smart with my money scene" so please be gentle with me

I was thinking that you could take gold coins oversees and sell them up there. Then you can bring back the cash and convert it in drips over a period of time. (I suppose that will all depend on the local trading, tax and currency laws. All things I know nothing about.)

Speaking of gold, I have around 10K saved at the moment and I am scared that Crash Gordon is going to erode its value so it is almost worthless. With this in mind I was looking to put a portion of this money into something that would hold its value when the pound falls to pieces. Is it too late to get on the gold bandwagon? If not in what format should I purchase it, spread bests, coins etc?

Thanks in advance.

Edited November 29, 2006 by The Haunted

[Unexpected]

I'm very new to this whole "smart with my money scene" so please be gentle with me

I was thinking that you could take gold coins oversees and sell them up there. Then you can bring back the cash and convert it in drips over a period of time. (I suppose that will all depend on the local trading, tax and currency laws. All things I know nothing about.)

Speaking of gold, I have around 10K saved at the moment and I am scared that Crash Gordon is going to erode its value so it is almost worthless. With this in mind I was looking to put a portion of this money into something that would hold its value when the pound falls to pieces. Is it too late to get on the gold bandwagon? If not in what format should I purchase it, spread bests, coins etc?

Thanks in advance.

Spread bets NO WAY!!! High risk. Must be very experienced.

I dont think you're too late to get in though, but thats just my opinion. I feel safer having a fair bit in gold.

Goldmoney, GBS.LSE and gold coins from Goldline are all safe as far as most here are concerned.

Do your own research though. All investment carries some risk.

I'd consider dripping the 10k in slowly if I were you.

[SundanceSquid]

Dear All

I work in finance so when I am not being boring I try and devise ways to get around Gordon Broon and the other scumbags miracle diseconomy

Anyway politics aside.......If you are buying batches of gold, for example gold shares/coins provided you don't sell them in the same year you can use up your £8k CGT exemption to make £8k cap gains tax free each year!

however some canny people buy real gold e.g. sovereigns and just horde them and keep quiet about them so that when you are getting old and feeble you can give your horde to your kids, mistresses etc and avoid scumbag government IHT con, the most unfair tax of all if you ask me

I heard about one guy that bought a ten kilo lump, painted it black and kept it as a doorstep so of course his wife never sussed

My only worry is the government especially this jock shyster will start getting miffed that people aren't joining in with the whole 'lets lie about inflation' and make the country get poorer and poorer ha ha' deal and try and basically outlaw the buying of gold / demand it is all stuck on a register.

However GOLD is FOR THE LONG TERM ONLY, dont even think of buying solid stuff unless you want to keep it for over 10 years.

Keep the faith

[UNSHURE]

Supose I bought 1 Kg of gold at todays current price of circa £11/gram. (£11,000)

1 gram of gold would buy me 11 loaves of bread assuming bread is £1 / loaf.

Fast forward a few years and assume we have undergone a period of runaway inflation.

Bread is now £50 a loaf!

However 1 gram of gold will still buy me 11 loaves of bread. (1gram of gold in now £550 / gram).

My kilo of gold bought for £11,000 is now worth £550,000!

Gordon want to charge me capital gains tax on my £539,000 "profit"

At 40% allowing for the 8K allowance this would be a bill of around £212,400.

But in reality I have made zero profit, the gold I bought a few years ago is still worth exactly what I paid for it ie 11,000 loaves of bread. However Gordon would have effectively stolen 4248 loaves of bread.

i.e. my £11,000 investment is now worth £6752 in real terms

Is there anyway to prevent being robbed by the govt. in this way?

I don't really want to start buying gold coins on ebay and storing them under my mattress

As far as I know, British Gold Coins (Sovereigns and Britanias) are legal tender. They are not, therefore, subject to Capital Gains tax. On the other hand, foreign Gold coins (Krugars, Maples, Eagles etc.) are subject to CGT.

http://www.taxfreegold.co.uk/investmentadvice.html