What are tax-efficient investments?
You’ll be familiar with pensions and ISAs. These let a client invest up to a certain amount while benefiting from tax relief. Investors can use their annual ISA allowance, for example, and expect to pay no tax on any growth or income.
The principles of the tax-efficient investments we specialise in are similar. They can help investors meet their financial goals, including passing more of their wealth to loved ones. However, because of their risk profile, they won’t be suitable for everyone.
Tax-efficient investments were created by the UK government to encourage certain behaviours from taxpayers by providing tax relief. Specialist tax-efficient investments encourage investment into small businesses or innovative companies, to help grow the economy. Since the nature of these investments is high risk, investors can claim a range of tax reliefs as compensation.
You’ll be familiar with pensions and ISAs. These let a client invest up to a certain amount while benefiting from tax relief. Investors can use their annual ISA allowance, for example, and expect to pay no tax on any growth or income.
Specialist tax-efficient investments were created by the UK government to encourage investment into businesses that they feel can help drive and grow the economy. Since the nature of these investments are high risk, investors can claim a range of tax reliefs as compensation.
They can offer income tax relief on investment, in addition to capital gains reliefs and tax-free income, and can help clients pass more of their wealth onto loved ones with relief from inheritance tax. Some also provide clients with unique access to exciting early-stage companies. However, because they’re high risk, they aren’t suitable for everyone.
Gilts (UK Government Bonds)
These are bonds issued by the UK Government to raise money – you are effectively lending to them. They offer fixed rates of income and growth. Gilts are exempt from UK Capital Gains Tax, meaning any profit you make from selling them is tax free in the UK. Check out our GILTs.
Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS)
These schemes are designed to encourage investment in small, high-risk companies by offering substantial tax relief. Both schemes benefit from tax relief on some of the income paid and both are exempt from UK Capital Gains Tax, subject to conditions.
Venture Capital Trusts (VCTs)
VCTs are investment funds that invest in small, unlisted companies so again these are a potentially higher risk option. You can claim 30% income tax relief on investments up to £200,000 per tax year and any growth from VCTs is tax free in the UK.