You have bought and sold some gold, and now you are not sure how HMRC sees it. Is the profit taxed as trading income, or as a capital gain? It matters, because the two routes carry very different rates, allowances and admin.
This guide is for jewellers, dealers and anyone buying gold with a profit in mind. We will walk through how HMRC actually decides the question, what changes once you cross the line into trading, and where VAT and money laundering rules quietly catch you out.
We will keep the figures dated to the 2025/26 tax year and cite the gov.uk pages behind every rule, so you can check the source yourself.
Why does it matter whether you are a trader or an investor? {#why-does-it-matter}
If your gold dealing is a trade, the profit is income, taxed at income tax rates plus Class 4 National Insurance. If it is the disposal of an investment, the gain falls under capital gains tax (CGT), with a separate annual exemption and lower rates.
There is no box you tick to choose. HMRC looks at the facts of what you are doing and applies a long-standing set of tests known as the badges of trade. Get the classification wrong and you can either overpay, or underpay and face penalties later.
How does HMRC decide if you are trading? {#badges-of-trade}
HMRC uses the badges of trade, a set of indicators drawn from decades of case law and set out in its Business Income Manual. No single badge is decisive. HMRC weighs them together and looks at "the transaction as a whole" (BIM20205).
The badges are not a scorecard. One strong factor can outweigh several weak ones, and a single transaction can still be a trade if its character is commercial. The nine badges are listed in HMRC's manual at BIM20205, with each badge explained in its own section.
What are the badges of trade for gold? {#badges-explained}
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Here is how each badge tends to play out for someone buying and selling gold.
| Badge of trade | What HMRC looks at | Points towards trading when... |
|---|---|---|
| Profit-seeking motive | Did you buy with the intention of selling at a profit? | You bought specifically to sell on, not to hold |
| Number of transactions | Are deals systematic and repeated? | You buy and sell gold regularly, in a pattern |
| Nature of the asset | Does the asset give income or enjoyment, or only a gain on sale? | Gold gives no yield, so resale is the only return |
| Existence of similar transactions | Do the deals resemble those of an existing trade? | You already trade in jewellery or bullion |
| Changes to the asset | Did you work on, refine or repackage it to sell? | You melt, assay, set or rebrand gold to add value |
| The way the sale was carried out | Did you sell as a trader would? | You advertise, use a website, or sell through trade channels |
| Source of finance | Did you borrow to buy, repaying from the sale? | You used short-term finance tied to the resale |
| Interval between purchase and sale | How long did you hold it? | You sold quickly after buying |
| Method of acquisition | How did the gold come to you? | You bought it, rather than inheriting or receiving a gift |
On that last-but-one point, HMRC is explicit. A person who holds an asset for many years before selling is "in a stronger position to argue that this is the realisation of an investment, than if the sale follows very soon after purchase" (BIM20310).
In practice, the badges that decide most gold cases are the profit motive, the frequency of transactions, and whether you did anything to the gold to make it more saleable. A one-off purchase of bullion held in a safe for five years looks like an investment. Buying scrap gold each week, refining it and selling it on looks like a trade.
Illustrative example: same profit, two very different tax bills {#worked-example}
Illustrative example. Priya buys gold and later sells it, making a £20,000 profit in 2025/26. She is already a higher-rate taxpayer from her main job, so this profit sits in her higher-rate band. Let us compare the two outcomes.
If she is an investor (capital gains tax):
- Gain: £20,000
- Less the CGT annual exempt amount for 2025/26: £3,000
- Taxable gain: £17,000
- Gold is not residential property, so the higher-rate CGT rate for other assets applies: 24%
- CGT due: £17,000 x 24% = £4,080
If she is a trader (income tax plus Class 4 NIC):
- Trading profit: £20,000, all in the higher-rate band
- Income tax at the higher rate of 40%: £20,000 x 40% = £8,000
- Class 4 NIC. Her main job has already used her Lower Profits Limit, and the profit sits above the Upper Profits Limit of £50,270, so the additional Class 4 rate of 2% applies: £20,000 x 2% = £400
- Total: £8,000 + £400 = £8,400
Same £20,000 profit. As an investor she pays £4,080; as a trader she pays £8,400. The difference here is £4,320.
The numbers move depending on your other income, but the direction is usually the same: for a one-off gain by a higher-rate taxpayer, CGT is often the cheaper outcome, mainly because of the lower rates and the separate annual exemption. That is exactly why HMRC scrutinises whether a "one-off investment" was really the start of a trade. You do not get to pick the cheaper label.
What changes once you are treated as a trader? {#trader-consequences}
Crossing into trading is not just about the headline rate. It changes how the whole activity is taxed and reported.
- Income tax on profits. Profits are taxed at 20%, 40% or 45% depending on your total income for 2025/26, after your personal allowance of £12,570.
- Class 4 National Insurance. A trader pays Class 4 NIC at 6% on profits between £12,570 and £50,270, and 2% above that, for 2025/26.
- Self Assessment. You report the trade on the self-employment pages of your tax return, with a 31 January online filing deadline.
- Capital allowances. Genuine business equipment such as assay tools, safes or workshop machinery can qualify for the Annual Investment Allowance, which gives 100% relief on up to £1,000,000 of qualifying plant and machinery. Note that your trading stock, the gold itself, is not plant and machinery; it is taxed through your trading profit, not capital allowances.
- VAT. If your taxable turnover exceeds the VAT registration threshold of £90,000 in any rolling 12 months, you must register. Gold has its own VAT rules, covered below.
If you are running this as a business, our tax advisory team can pin down the classification before HMRC does, and make sure you are claiming everything a trader is entitled to.
How is investment gold treated for VAT? {#investment-gold-vat}
This is where gold stops behaving like an ordinary commodity. Investment gold is exempt from VAT.
HMRC defines investment gold in VAT Notice 701/21 as either:
- gold of a purity not less than 995 thousandths, in the form of a bar or wafer of a weight accepted by the bullion markets; or
- a gold coin minted after 1800, of a purity not less than 900 thousandths, that is or has been legal tender in its country of origin, and is normally sold at a price not more than 180% of the open market value of its gold content.
Because the supply is exempt, you do not charge VAT when you sell investment gold, and you generally cannot recover input VAT on related costs. There is a separate notice, 701/21A, listing specific coins HMRC accepts as investment gold coins.
There is also a Special Accounting Scheme for gold, a reverse charge that applies to supplies of certain gold between VAT-registered businesses. Under it the buyer, not the seller, accounts for the output VAT to HMRC. The seller's invoice must state the VAT due and make clear the buyer is to account for it. This matters if you trade bullion or scrap gold business to business, because getting the invoicing wrong leaves the VAT unaccounted for.
Gold that does not meet the investment gold definition, for example most jewellery and many manufactured items, is normally standard-rated at 20%.
Does the VAT margin scheme apply to gold? {#margin-scheme}
Only in part. The VAT margin scheme lets you account for VAT on your margin rather than the full selling price, which is useful for second-hand goods such as pre-owned jewellery.
But HMRC is clear that you must not use a margin scheme for precious metals, investment gold or precious stones (VAT Notice 718). So a second-hand gold necklace can fall within the margin scheme as second-hand jewellery, while a gold bar or loose investment gold cannot. If you buy and sell second-hand jewellery alongside bullion, you need to keep the two streams apart in your records.
Do I need to register as a high value dealer? {#high-value-dealer}
If you accept large cash payments, possibly. A high value dealer under the money laundering regulations is any business or sole trader that accepts or makes cash payments of 10,000 euros or more (or the equivalent in any currency) for goods, whether in a single payment or a series of linked payments.
If that is you, you must register with HMRC for anti-money laundering supervision before you start accepting such payments, and follow customer due diligence and record-keeping rules. This catches gold and jewellery dealers regularly, because cash deals are common in the trade. It applies whether the underlying profit is taxed as a trade or as a capital gain.
A quick decision walkthrough {#decision-walkthrough}
Work through these questions to get a sense of where you sit. None is decisive on its own, but together they point the way.
- Did you buy the gold mainly to sell it on at a profit? Yes leans towards trading.
- Do you do this repeatedly, in a pattern? Repeated, systematic dealing leans towards trading.
- Do you do anything to the gold to make it more saleable (refine, assay, set, rebrand)? Yes leans towards trading.
- Do you sell the way a business would, with advertising, a website or trade channels? Yes leans towards trading.
- Did you hold it for a long time before selling? A long hold leans towards investment.
- Did you inherit or receive it, rather than buy it? Acquisition by gift or inheritance leans towards investment.
Mostly "yes" to 1 to 4? You are likely trading, so think income tax, Class 4 NIC and Self Assessment. Mostly the investment-side answers? CGT is more likely. Genuinely on the fence is exactly when a quick review with an accountant pays for itself, because HMRC will form its own view from the same facts.
FAQs {#faqs}
Is selling gold subject to income tax or capital gains tax?
It depends on whether you are trading. If your gold dealing has the character of a trade under HMRC's badges of trade, the profit is income, taxed at income tax rates plus Class 4 National Insurance. If you are realising an investment, the gain falls under capital gains tax, with a £3,000 annual exempt amount for 2025/26 and rates of 18% or 24% on other assets.
Do I pay VAT when I sell gold?
Investment gold, as defined in VAT Notice 701/21, is exempt from VAT, so you do not charge VAT on it. Gold that is not investment gold, such as most jewellery, is normally standard-rated at 20%. Supplies of certain gold between VAT-registered businesses use a reverse charge called the Special Accounting Scheme for gold, where the buyer accounts for the VAT.
Can I use the VAT margin scheme for gold?
Not for precious metals, investment gold or precious stones; HMRC excludes these from the margin scheme. You can use the margin scheme for genuine second-hand goods such as pre-owned jewellery, provided you meet the scheme's record-keeping conditions.
How many gold transactions make me a trader?
There is no fixed number. Frequency is only one of the badges of trade. Systematic, repeated dealing supports trading, but a single transaction can still be a trade if it is commercial in character, and a long-held one-off purchase is more likely to be an investment.
Do gold dealers have to register for money laundering supervision?
If you accept or make cash payments of 10,000 euros or more for goods, you are a high value dealer and must register with HMRC for anti-money laundering supervision before accepting those payments. This applies regardless of how the profit is taxed.
Should I report a one-off gold profit on my tax return?
If it is an investment gain above your annual exempt amount, report it on the capital gains pages. If HMRC would view it as trading, report it on the self-employment pages instead. Because the classification drives the rate and the admin, it is worth confirming which applies before you file.
Want help working out whether your gold dealing is a trade or an investment, and filing it correctly? Book a call with a Zmartly accountant, or see how we support jewellers and gold dealers.
Sources {#sources}
- HMRC Business Income Manual, badges of trade (BIM20205): https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205
- HMRC Business Income Manual, interval between purchase and sale (BIM20310): https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20310
- Income Tax rates and allowances: https://www.gov.uk/income-tax-rates
- Self-employed National Insurance rates (Class 4): https://www.gov.uk/self-employed-national-insurance-rates
- Capital Gains Tax rates and annual tax-free allowances: https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances
- Annual Investment Allowance: https://www.gov.uk/capital-allowances/annual-investment-allowance
- VAT registration thresholds: https://www.gov.uk/vat-registration-thresholds
- Gold acquisitions, imports, investments and VAT (Notice 701/21): https://www.gov.uk/guidance/gold-acquisitions-imports-investments-and-vat-notice-70121
- The Margin and Global Accounting Scheme (VAT Notice 718): https://www.gov.uk/guidance/the-margin-and-global-accounting-scheme-vat-notice-718
- Check if you need to register for money laundering supervision as a high value dealer: https://www.gov.uk/guidance/check-if-you-need-to-register-for-money-laundering-supervision-if-youre-a-high-value-dealer
