GoldMinr: UK Equities vs. Gold: Where Are Cautious Investors Placing Their Bets?

In times of economic uncertainty, cautious investors often seek safe havens for their capital. Two popular choices in the UK are equities, represented by indices like the FTSE 100, and gold. But where are cautious investors placing their bets today? With inflation remaining sticky at 3.8% in August 2025, exceeding targets set by the Bank of England, the decision becomes even more critical. This blog post will delve into the current landscape, examining the performance of UK equities versus gold, the factors influencing investor sentiment, and the potential tax implications of each investment.

UK Equities: Potential for Growth, but with Higher Risk

The UK stock market, particularly the FTSE 100, lists the top 100 companies by market capitalization and has long been a popular avenue for investors seeking growth. The FTSE 100 is an international stock exchange, unlike the FTSE 250 which is heavily domestic. Historically, stocks have offered the potential for quicker profits, but this comes with higher risks.

FTSE 100 Performance

As of September 19, 2025, the GB100 index stood at 9217, a 0.12% decrease from the previous session. While the index has seen a decline of 0.77% over the past month, it remains 11.99% higher than a year ago. However, it’s important to note that the FTSE 100’s overall gain in the past ten years has been just 13.17%. Starting at 6,731.43 points in October 2013, it reached 7617.97 points in September 2023.

Dividends: A Key Advantage

One of the unique benefits of stocks is the potential for dividends, which can offer a regular income stream on top of share value. Dividends are optional bonuses paid to shareholders annually, semi-annually, or quarterly, and the amount can vary based on company performance. However, dividends are not guaranteed, and companies may decide not to pay them when profits are down.

Tax Implications

Investing in UK equities can have several tax implications:

• Capital Gains Tax (CGT): CGT is levied on the profit made when selling shares that have increased in value. As of the 2024/25 tax year, individuals have an annual CGT allowance of £3,000. Gains exceeding this threshold are taxed at 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers.
• Dividend Tax: If you receive money from share dividends, a dividend tax may apply. For the 2024/25 tax year, the annual tax-free dividend allowance is £500. Dividend income exceeding this allowance is taxed at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers.
• Stamp Duty Reserve Tax (SDRT): When you buy shares electronically, you usually pay a tax or duty of 0.5% on the transaction.

Strategies to Mitigate Tax

• Stocks and Shares ISA: Investing through a Stocks and Shares ISA or Junior ISA shelters your investments from Capital Gains Tax and Income Tax. You can invest up to £20,000 per year in an ISA.
• Self-Invested Personal Pension (SIPP): A SIPP allows you to invest up to £60,000 per year, and contributions are tax-deductible. However, you cannot withdraw from a SIPP until the age of 55 (57 as of April 2028).

Gold: A Timeless Safe Haven

Gold has been considered a safe haven asset for centuries, offering a reliable store of value, especially during economic uncertainty. Unlike fiat currencies, gold cannot be printed at will by governments or central banks, making it a hedge against inflation and geopolitical risks.

Gold Performance

Gold has significantly outperformed the FTSE 100 in recent decades. From 2000 to 2024, the FTSE 100 index value increased by just 17%, while gold gained a much more impressive 850% in value. If you invested £10,000 in gold at the turn of the millennium, it would have been worth over £90,000 by 2024.

Gold as a Hedge Against Inflation

Gold is a proven hedge against inflation, preserving the real value of assets when other prices rise. During the recession in 2008 and the COVID-19 pandemic, as stock markets plummeted, gold surged in value as investors sought refuge in this timeless asset.

Tax Implications

The tax implications of investing in gold in the UK can be complex, with different rates of Value Added Tax (VAT) and Capital Gains Tax (CGT) applied depending on the type of gold you invest in.

• VAT: Investment-grade gold, defined by HMRC as having a purity of at least 0.995, is exempt from VAT in the UK. This includes most gold bars and bullion coins. However, silver, platinum, and palladium are subject to 20% VAT unless stored in a bonded vault.
• CGT: Selling gold bars or non-UK gold coins at a profit could incur CGT if you make more than your allowance. However, UK legal tender gold coins, such as Gold Britannias and Gold Sovereigns, are exempt from Capital Gains Tax, regardless of how much profit you make.

Tax-Efficient Gold Investments

• UK Gold Coins: Buying UK gold coins, such as Gold Britannias and Gold Sovereigns, benefits from being Capital Gains Tax-free due to their legal tender status.
• Investment-Grade Gold: Investment-grade gold is exempt from VAT, making it a tax-efficient option.

Investor Sentiment: A Shift Towards Gold?

Amid escalating uncertainty over tariff policy and a rise in capital gains tax, UK retail investors are gravitating towards gold. A May 2025 survey revealed that nearly 60% of UK investors anticipate an increase in gold’s value over the next year, surpassing traditional investments like the FTSE 100, with only 39% of investors predicting an increase in the index’s value.

This shift in sentiment is driven by several factors:

• Safe Haven Status: A majority (53%) of future precious metals investors are motivated to invest by gold’s ‘safe haven’ status.
• Lower Risk: Many (29%) are encouraged by the belief that gold is less risky than other investments.
• Inflation Hedge: Gold protects investors and their wealth against the devaluation caused by inflation.

Diversification: The Key to Reducing Risk

Savvy investors typically diversify their portfolios by investing in different assets to reduce risk and increase potential returns. A mix of equities and gold can provide a balance between growth and stability, especially during times of economic uncertainty.

Conclusion

Cautious investors in the UK face a challenging decision when allocating their capital. While UK equities offer the potential for growth and dividend income, they come with higher risks and various tax implications. Gold, on the other hand, provides a safe haven, acting as a hedge against inflation and geopolitical risks, with certain tax advantages for specific types of gold investments.

Ultimately, the best approach depends on individual circumstances, risk tolerance, and investment goals. Diversification remains key, and a well-balanced portfolio that includes both UK equities and gold may be the most prudent strategy for cautious investors navigating today’s uncertain economic landscape.

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Disclaimer: This blog post is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making any investment decisions.