What Is The Cheapest Way To Buy Silver?

The cheapest way to buy silver has become a popular topic among investors in the UK as the financial situation becomes more unpredictable. Have you ever wondered why more people prefer silver instead of traditional investments? Silver has real value and a long history. It can help protect against rising prices and safeguard your wealth.

If you have decided to invest in silver, read more about “How to Invest in Silver.” One of the big problems in investing in silver is “What is the Cheapest Way to Buy Silver?” Another important question is “Should I Buy Silver Bars or Coins?” New or old? Bulk or small amount?

In this guide, we’ll explore different strategies to help you make smart choices and get the most value for your money.

Cheapest Ways to Buy Silver in the UK

When it comes to investing in silver, there are several ways to maximize value and get the most out of your purchase. Silver is a popular alternative to gold due to its affordability, liquidity, and versatility as both an industrial and investment metal. 

Below is a breakdown of the most cost-effective methods for buying the cheapest silver:

Silver Bars: The Larger, The Cheaper

For investors looking to buy silver at the lowest premiums, silver bars—particularly larger ones such as 1kg or above—are often the most cost-efficient option. Here’s why:

• Lower Premiums: Larger bars generally carry lower manufacturing costs per ounce, translating to lower premiums for investors. For instance, a 1kg silver bar will have a significantly lower premium compared to a smaller 100g or 250g bar.
• Economies of Scale: The more silver you buy in one go, the less you’ll pay in terms of premiums over the spot price. For serious investors who want to buy silver in bulk, 1kg bars or even 5kg bars are highly recommended.
• Easier Storage: While larger bars are heavier, they take up less space than an equivalent amount of silver in coins, making them easier and cheaper to store in secure vaults or at home.

In the UK, silver bars from reputable refiners such as Royal Mint or LBMA-approved refineries are widely available, and buying from trusted sources ensures quality and authenticity. Many bullion dealers offer discounts when purchasing larger quantities of silver bars, making them an attractive choice for long-term investors.

Silver Coins: Britannia and Other UK Favourites

Though silver coins typically carry higher premiums than bars due to minting and distribution costs, they still offer excellent value. Certain coins, like the Britannia or Queen’s Beasts, have a strong advantage:

• Capital Gains Tax (CGT) Exemption: UK silver coins like Britannia are CGT-free, meaning that any profits you make when selling them won’t be taxed. This makes them a tax-efficient option for UK residents.
• High Liquidity: Coins are easier to sell in smaller quantities than bars. For those who may want to liquidate parts of their investment over time, coins offer flexibility.
• Collectible Value: Some coins have numismatic value, meaning that their design or limited mintage can increase their price over time. For example, special edition silver coins issued by the Royal Mint often gain value beyond the price of silver.

Even though silver coins like Britannias may come with slightly higher premiums, their tax benefits and flexibility make them a worthwhile consideration for UK investors.

Junk Silver: A Budget-Friendly Option

For budget-conscious buyers, junk silver offers a unique and often overlooked way to invest. Junk silver refers to old silver coins that were once in circulation and contain a percentage of silver, typically 90% or higher. In the UK, this might include pre-1920 or pre-1947 coins that are made from sterling or 50% silver, respectively.

• Lower Premiums: Junk silver often comes with lower premiums compared to newly minted coins, making it a cost-effective way to acquire silver. The value is based almost entirely on the silver content rather than any collectible or aesthetic value.
• Historic Value: These coins can carry historical significance, adding an extra layer of appeal for collectors who also want to invest in silver.
• Accessibility: Junk silver is readily available through local coin shops, online platforms like NextDayBullion, and auctions, making it an easy entry point for first-time buyers or smaller investors.

While junk silver doesn’t offer the same tax benefits as UK coins like Britannia, it’s a great option for those looking to acquire silver at a low cost.

The Britannia Advantage

For UK buyers, the Britannia silver coin stands out as a smart choice due to its CGT exemption and status as legal tender. Internationally recognized silver bars, while offering value in terms of lower premiums, don’t provide the same tax benefits. UK investors seeking a balance between flexibility, value, and tax advantages may find Britannia more appealing than generic silver bars.

Latest Trends in Silver Investment

As of 2024, the silver market is showing strong potential due to growing industrial demand, particularly in sectors like solar energy and electric vehicles (EVs). The UK government’s commitment to green energy and reducing carbon emissions is expected to increase silver’s demand, as it’s a key component in photovoltaic cells and batteries.

Furthermore, with the ongoing economic uncertainty, inflation concerns, and the weakening pound against other currencies, UK investors are increasingly turning to silver as a safe-haven asset. 

According to the latest reports from The Silver Institute, global silver demand is projected to rise by 15% in 2024, largely driven by industrial use, which could push prices higher in the long term.

Note: NextDayBullion also offers the service of buying and selling second-hand silver coins and bars. However, please note that our selection of second-hand silver products is limited. If you want to purchase these silver bars and coins, please order quickly. You can also place your order by calling us at 0800 862 0247, available from Monday to Friday, 11 AM to 9 PM.

Why Buying Silver in Bulk

For UK investors, buying silver in bulk can offer significant cost savings, especially on premiums. However, there are challenges to consider as well, particularly regarding storage and liquidity.

Lower Premiums When Buying in Bulk

• 5kg Bars and Large Quantities of Coins: Buying silver in bulk, such as purchasing 5kg bars or large amounts of coins, often leads to lower premiums. This is because minting costs and distribution fees are spread across a greater quantity of silver. Bulk purchases of 1kg or 5kg bars from trusted refiners like PAMP Suisse or Royal Mint can lead to savings compared to buying smaller bars or coins.
• Silver Coins in Bulk: Similarly, buying large quantities of coins can lower premiums, especially for well-recognized coins like the Britannia. UK dealers often offer discounted rates for bulk purchases of coins, making it possible to get silver at prices closer to the spot rate.

Storage and Insurance Challenges for Bulk Silver

While bulk buying offers significant cost savings, there are important considerations:

• Storage: Large quantities of silver, especially in bar form, require secure storage. Investors often opt for professional vaulting services like those offered by BullionVault or Royal Mint Vault, where storage is both secure and insured. Home storage, while an option, raises risks of theft and higher insurance costs.
• Insurance: Ensuring your silver is insured for its full value can become costly with large investments. UK-based investors should consider specialized insurance policies tailored to bullion storage. Providers like Chubb Insurance offer solutions specifically for precious metals stored either at home or in professional vaults.

Liquidity: When Bulk Buying May Not Make Sense

While buying in bulk can reduce premiums, it can also reduce flexibility. Selling a 5kg bar in a rising market may result in liquidity challenges, as fewer buyers may be interested in large purchases. Coins or smaller bars offer more flexibility for selling portions of your investment.

Tax-Free Silver Products: What UK Buyers Should Know

Understanding VAT on Silver Purchases in the UK

One of the biggest concerns for UK silver investors is the Value Added Tax (VAT). Unlike gold, which is VAT-free in the UK, silver is subject to 20% VAT, adding significantly to the cost. This makes it crucial for buyers to consider tax-efficient strategies.

Capital Gains Tax (CGT) Exemption on Britannia Coins

A major advantage of investing in UK silver coins, such as the Britannia or Queen’s Beasts, is that they are exempt from Capital Gains Tax (CGT). This means that any profit made from the sale of these coins is tax-free, offering significant savings in the long run compared to silver bars or foreign coins, which may be subject to CGT.

• Example: A UK investor selling £50,000 worth of Britannia coins would not pay any tax on their gains while selling the same amount of silver bars could result in a CGT bill if gains exceed the annual allowance.

How to Avoid VAT on Silver Purchases

For UK investors looking to minimize VAT, there are a few strategies to consider:

• Buy from VAT-Free Regions: Some dealers offer the ability to purchase and store silver in VAT-free zones, such as Switzerland. Companies like BullionVault or GoldCore provide options for UK buyers to store silver in overseas vaults, avoiding VAT altogether.
• Buy UK Legal Tender Coins: As mentioned earlier, silver Britannia coins are an excellent option, not only for their CGT exemption but also because they are considered UK legal tender. This gives them certain tax advantages over other forms of silver.

Buying Silver Online: How to Get the Best Deal Safely

In today’s digital world, buying silver online has become increasingly popular for UK investors. However, with the convenience of online purchases come certain risks. It’s crucial to know how to secure the best deal while ensuring the safety of your investment.

Pros and Cons of Buying Silver Online vs. Physical Stores

Buying Silver Online

• Pros: Online platforms offer a wider selection of silver products, often at more competitive prices compared to physical stores. Websites like NextDayBullion allow buyers to easily compare prices, and premiums, and find deals without leaving home. We also provide in-depth information about the products, including purity, weight, and certifications, helping buyers make informed choices.
• Cons: However, the primary challenge is ensuring authenticity and security. Without physically seeing the silver before purchase, buyers need to rely on the seller’s reputation and online reviews. This makes it essential to buy only from reputable sellers like NextDayBullion, which have a track record of trust and customer satisfaction in the UK market.

Buying from Physical Stores

• Pros: Physical stores allow you to inspect silver products before buying, offering reassurance about authenticity and quality. For some investors, seeing and holding the physical asset is a critical part of the buying process.
• Cons: However, physical stores may have higher overhead costs, leading to higher premiums on silver products. Additionally, the range of products available may be limited compared to online platforms.

Safety Tips for UK Buyers

When buying silver online, UK buyers should follow these safety measures:

1. Check for Authenticity: Ensure that the silver you’re purchasing comes with proper certifications, such as an LBMA (London Bullion Market Association) hallmark or an assay certificate. Reputable sellers like NextDayBullion provide detailed product descriptions, including the purity and origin of the silver.
2. Reputation of Sellers: Always buy from well-known platforms. Look for customer reviews, check for membership in professional organizations, and see if the seller is accredited by industry bodies like the British Numismatic Trade Association (BNTA).
3. Secure Delivery: Ensure the seller offers insured delivery with discreet packaging. Companies like NextDayBullion provide secure delivery options, ensuring that your investment arrives safely and fully insured.

Potential Pitfalls to Avoid When Buying Silver

While silver can be a smart investment, there are some common mistakes that buyers should avoid:

1. Overpaying on Premiums: One of the biggest mistakes is overpaying for silver. Premiums—charges above the spot price—can vary widely between dealers and products. It’s crucial to compare premiums before making a purchase. Bars typically have lower premiums than coins, but coins like Britannias may offer other benefits, such as CGT exemption.
2. Hidden Storage Fees: If you’re storing your silver with a third party or a vault, ensure you understand the storage fees upfront. Some services may charge high fees, which can eat into your investment over time. Always calculate the total cost of storage before committing.
3. Buying from Untrustworthy Sources: Fraudulent or disreputable sellers can cost you dearly. Avoid lesser-known platforms, especially those with no customer reviews or certifications. Stick to recognized sellers like NextDayBullion, which has a solid reputation in the UK.
4. Not Understanding Tax Implications: Silver is subject to VAT (20%) in the UK, unlike gold, which is VAT-free. Additionally, some silver products are CGT (Capital Gains Tax) exempt, like Britannia coins, but others may not be. Understanding these tax implications can save you money in the long term.

Silver’s Role in Emerging Technologies

One of the key drivers of silver demand in the future is its use in emerging technologies, particularly in sectors like renewable energy and electric vehicles:

• Electric Vehicles (EVs): Silver is a critical component in the manufacturing of EVs, which are expected to see massive growth in the coming decades. According to the World Silver Survey 2023, silver demand for the EV industry could rise by 30% by 2030 as governments push for cleaner transportation solutions.

Solar Energy: Silver plays a vital role in the production of solar panels. As countries like the UK ramp up their green energy initiatives, demand for solar technology, and by extension, silver, will rise. In 2023, it was estimated that nearly 10% of silver’s global demand came from the solar sector.