Gold Banking: Holding Physical Gold as a Private Banking Client
Gold has served as a store of value for millennia, and its role in the portfolios of HNW and internationally mobile investors remains significant. The question is not whether gold has a place in a diversified portfolio — that is a separate investment decision — but rather how to hold it when you do. The institutional gold custody market offers a range of structures, from direct allocated gold in a named vault to exchange-traded instruments that combine physical backing with ISA eligibility.
This guide explains the key structures, the main custodians, the UK tax treatment, and the alternatives that allow exposure to gold within a tax-sheltered wrapper.
Important: Gold prices, storage costs, tax rules, and product availability change. Always verify current rates and consult a qualified tax adviser before making investment decisions.
Allocated vs Unallocated Gold: The Fundamental Distinction
The most important concept in gold custody is the distinction between allocated and unallocated gold.
Unallocated Gold
When you hold unallocated gold, you have a claim on the custodian for a specified quantity of gold. The custodian maintains a pool of physical gold, and your holding is a share of that pool. You do not own specific, numbered bars. You are an unsecured creditor for gold.
The advantage of unallocated gold is lower cost — there is no specific storage or insurance cost for "your" bars because there are no bars specifically assigned to you. The disadvantage is counterparty risk: if the custodian becomes insolvent, your unallocated gold claim ranks alongside other unsecured creditors. In practice, the major bullion banks and custodians are unlikely to fail in this way, but the structural risk exists.
Allocated Gold
Allocated gold means you own specific, numbered bars or coins stored on your behalf. The vault operator keeps a register identifying your bars by serial number, weight, and purity. Your name appears on the bar register. Your gold is ring-fenced from the custodian's own assets and cannot be used to satisfy the custodian's liabilities if it becomes insolvent.
The practical protection this provides is substantial. During the financial crisis of 2008-2009, clients of failed banks who held allocated gold retained it; those with unallocated claims faced the uncertainty of an insolvency process.
The cost of allocated storage is higher than unallocated — typically 0.1% to 0.5% of the gold value per year in storage and insurance fees, depending on the vault, bar size, and total holding. For significant holdings, the security premium is worth paying.
Major Gold Custody Providers
UK and International Vaults
The world's largest independent vault operators for institutional and private clients include Brink's, G4S, and Malca-Amit. Each operates a network of high-security vaults in major financial centres (London, Zurich, Singapore, Hong Kong, New York), allowing internationally mobile clients to choose the jurisdiction in which their gold is stored.
Via Mat International (now part of Loomis) operates an extensive international vault network and is used by institutional investors, pension funds, and HNW private clients.
London Bullion Market Association (LBMA): The LBMA sets the "Good Delivery" standard for gold bars — the 400 troy ounce bar, assayed at minimum 99.5% purity, with an approved refiner stamp — that is the benchmark for institutional gold transactions. Allocated gold held within the LBMA system is the most liquid and most trusted form of institutional physical gold.
Swiss Options
Switzerland remains the world's pre-eminent private gold banking jurisdiction. Following Credit Suisse's absorption into UBS in 2023, UBS now manages one of the largest private gold custody businesses in the world. Zürcher Kantonalbank (ZKB) offers an allocated gold account with one of the oldest and most trusted gold programs in Switzerland. Julius Baer and Degussa Bank are also significant providers.
The appeal of Swiss gold custody includes political neutrality, strong private property rights, deep institutional infrastructure, and the practical fact that Zurich is a major global logistics hub for precious metals.
UK Private Banking Gold Services
Several UK private banks offer gold custody as part of a broader wealth management relationship. Typically these are offered alongside precious metals dealing services and investment advisory, rather than as a stand-alone product. The minimum holding levels tend to be aligned with the bank's overall private banking threshold (commonly £500,000 to £1m in investable assets under management).
UK Tax Treatment of Physical Gold
Capital Gains Tax
Physical gold is a chattel for UK tax purposes — a tangible personal property asset. Unlike "wasting chattels" (which have a useful life of 50 years or less and qualify for CGT exemption), gold has an indefinite useful life and does not qualify for the wasting chattel exemption. CGT therefore applies to gains from the sale of physical gold at the standard rates. Since 30 October 2024 the rates on assets other than residential property are the same as those on residential property — 18% for basic rate taxpayers and 24% for higher rate taxpayers — so gold gains are taxed at 18%/24% depending on your income (verify current rates as these have changed in recent years).
The annual CGT exempt amount (£3,000 for 2026/27 — reduced from £6,000 in 2023/24 and £12,300 previously) can be applied against gains, including gains on gold. For a small holding, careful timing of disposals can use the annual exemption efficiently.
VAT
Investment gold is exempt from VAT under HMRC's investment gold rules. Investment gold includes:
- Gold bars of a purity of 99.5% or greater.
- Gold coins that are of a purity of 90% or more, minted after 1800, are (or were) legal tender in their country of origin, and are sold at a price that does not exceed 180% of the open market value of the gold they contain.
This VAT exemption is significant. It means that when you buy a LBMA Good Delivery bar, you pay no VAT — unlike when you buy silver, platinum, or jewellery. For a £100,000 purchase, the saving over a VATable metal is £20,000 (at 20% standard rate). The exemption is one of the core reasons gold is preferred over other physical metals as a store of value for UK investors.
Gold Inside an ISA
Physical gold cannot be held inside a Stocks and Shares ISA. ISAs hold qualifying securities (shares, bonds, funds, ETCs) — not physical commodities. This is a meaningful limitation for UK investors seeking to shelter gold gains from CGT within an annual allowance. However, exchange-traded gold instruments can be held in an ISA (see below).
The Exchange-Traded Gold Route
For investors who want exposure to gold prices without the logistics and cost of physical custody, exchange-traded commodities (ETCs) backed by physical gold offer a practical alternative.
Key Products
iShares Physical Gold ETC (ticker: SGLN): One of the largest and most liquid physically-backed gold ETCs. Managed by BlackRock. Physical gold allocated in the custodian's vaults (HSBC London) backs the ETC.
Invesco Physical Gold ETC (ticker: SGLD): Similar structure. Physical gold held by JP Morgan as custodian.
WisdomTree Physical Gold UCITS ETC: Another well-established option with physical backing.
Each of these ETCs holds allocated, LBMA Good Delivery gold in a vault. The ETC issuer is the registered owner of the gold, but the gold is allocated — ring-fenced — from the issuer's general assets. The investor owns a share in the ETC, which in turn owns the gold.
ISA Eligibility: A Meaningful Advantage
Unlike physical gold, exchange-traded gold ETCs are eligible for a Stocks and Shares ISA. This is a significant tax planning opportunity for UK residents:
- Gold ETC gains inside an ISA are completely exempt from CGT.
- Gold ETC dividends/distributions inside an ISA are exempt from income tax.
- For a higher rate taxpayer making gains of £20,000+ on a gold holding over time, the ISA shelter saves around £4,800 in CGT at the 24% higher rate.
The trade-off: you own a financial security (a claim via the ETC issuer) rather than directly allocated gold bars. The security is physically backed, but it is not the same as owning bar number XYZ in your own name.
Comparing the Routes
| Allocated Physical | Unallocated Physical | Gold ETC | |
|---|---|---|---|
| Counterparty risk | Very low (your bars) | Higher (custodian creditor) | Low (allocated backing) |
| Custody cost | 0.1–0.5%/year | Lower | 0.12–0.25%/year (TER) |
| ISA eligibility | No | No | Yes |
| Liquidity | Moderate (sell via dealer) | High | Very high (exchange-traded) |
| CGT applies | Yes | Yes | Yes (unless in ISA) |
| VAT exempt | Yes (investment gold) | Yes | Not applicable |
How Global Investments Can Help
Global Investments works with HNW and internationally mobile clients for whom gold forms part of a broader diversified portfolio strategy. We can connect you with private banking providers and specialist custodians offering allocated gold services, advise on the structuring of gold holdings within or alongside an investment portfolio, and help you understand the UK and international tax implications of different custody approaches.
Whether you are looking to establish an initial allocation or restructure an existing physical holding, our team can help ensure the approach is efficient, properly custodied, and integrated with your overall financial plan.
This guide is for general educational purposes only and does not constitute investment or tax advice. Gold prices can fall as well as rise and past performance is not a guide to future returns. Always seek independent advice tailored to your circumstances before investing.
This guide is for general information only and does not constitute financial advice or a personal recommendation. Banking regulations, tax rules, and product availability change — always verify current rules and seek advice from a qualified independent financial adviser or regulated banking specialist before making any decisions. The value of investments can fall as well as rise and you may get back less than you invest.