Uni decision

Should I accept the offer I have now which is based on low predicted grades however they upgraded me from a foundation year too a first year entry at a russel group uni or should I take the gap year and go for Oxford which is my dream

Should I accept the offer I have now which is based on low predicted grades however they upgraded me from a foundation year too a first year entry at a russel group uni or should I take the gap year and go for Oxford which is my dream

This depends on a lot of things not covered in your post including:
- How near to a competitive Oxford application are you? If you are applying to FY's this time around, I would think a little way off at least? I don't know if you have achieved or predicted grades, but maybe wait until results day and let that guide you. You are not committed to going somewhere just because you accept an offer on UCAS.
- If you went to another decent uni this year, are you going to spend your time there wondering "what if?" about an Oxford application?
- If you took a year out, applied to Oxford and were then rejected, would you consider that a waste of a year, or having given it your best shot and scratched that "what if?" itch?

I was planning on a gap year anyway so I think I could defer my current offer and then that could be my backup

You can't be placed with a deferred option and reapply in the next cycle, you have to be released from the deferred place to reapply.