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Tax-efficient investing is about making sure more of your returns stay with you. The UK offers a range of reliefs for savers and investors, from ISAs and pensions to the venture capital schemes that reward investment in smaller, growing companies. Used well, and in the right order, they can significantly reduce the income tax, capital gains tax and inheritance tax you pay. Several of these reliefs changed in the 2025 Budget, so it is worth reviewing your plans for the 2026/27 tax year.

This guide summarises the main options. For tailored planning, see our Tax Efficient Investments service.

1. Use your annual allowances first

Before looking at more complex investments, make sure you are using the allowances that every individual has each tax year:

• Capital gains tax annual exempt amount: £3,000 of gains each year are tax-free.
• Dividend allowance: the first £500 of dividends is tax-free. Dividend tax rates for basic and higher rate taxpayers increased from April 2026, which makes sheltering dividend-paying investments more valuable.
• Personal savings allowance: up to £1,000 of savings interest is tax-free for basic rate taxpayers (£500 for higher rate taxpayers).

Married couples and civil partners can usually transfer investments between them without a tax charge, so that both sets of allowances and the lower tax bands are used.

2. Individual Savings Accounts (ISAs)

ISAs remain the simplest tax shelter. Income and gains inside an ISA are free of income tax and capital gains tax, and nothing needs to be reported on your tax return. The overall ISA allowance is £20,000 a year.

From 6 April 2027, savers under 65 will only be able to put up to £12,000 of that allowance into cash ISAs, with the balance available for stocks and shares or other ISA types. Savers aged 65 and over keep the full £20,000 cash ISA limit. Those aged 18 to 39 can also use a Lifetime ISA, which attracts a 25% government bonus on contributions of up to £4,000 a year towards a first home or retirement.

3. Pensions

Pension contributions receive tax relief at your highest rate of income tax, and investments grow free of income tax and capital gains tax. Most people can contribute up to the £60,000 annual allowance (or 100% of their earnings, if lower), and unused allowance from the previous three tax years can often be carried forward.

The allowance is tapered for those with very high incomes, and it falls to £10,000 once you have flexibly accessed a pension. Company directors can often make employer contributions from their company, which are usually deductible for corporation tax and save National Insurance as well.

From April 2027, most unused pension funds and death benefits will fall within the scope of inheritance tax. Pensions remain highly tax-efficient for retirement saving, but they will no longer be the inheritance tax shelter they once were, so estate plans built around passing on pension wealth should be reviewed. Read more on our Pension Planning page.

4. Enterprise Investment Scheme (EIS)

The EIS encourages investment in smaller, unquoted trading companies. It offers generous reliefs in return for higher risk:

• 30% income tax relief on investments of up to £1 million a year (up to £2 million where the excess is invested in knowledge-intensive companies)
• No capital gains tax on the disposal of EIS shares held for at least three years, provided income tax relief was given and not withdrawn
• Capital gains from other assets can be deferred by reinvesting them in EIS shares
• Loss relief against income or gains if the investment fails
• EIS shares will usually qualify for business relief from inheritance tax after two years

From April 2026, the amount that companies can raise under the EIS and VCT schemes doubled, opening the schemes to larger, scaling businesses. The investor relief rate was unchanged.

5. Seed Enterprise Investment Scheme (SEIS)

The SEIS supports the very earliest stage companies. Investors can claim 50% income tax relief on up to £200,000 a year, and gains reinvested in SEIS shares can be 50% exempt from capital gains tax. As with the EIS, shares must normally be held for three years, and gains on their disposal are exempt.

6. Venture Capital Trusts (VCTs)

VCTs are listed companies that invest in a portfolio of smaller businesses, spreading the risk. Investors can subscribe up to £200,000 a year. Dividends from VCTs are tax-free and there is no capital gains tax when the shares are sold. For new subscriptions from 6 April 2026, income tax relief was reduced from 30% to 20%, and VCT shares must be held for at least five years to keep it.

7. Inheritance tax and business relief investments

Shares in qualifying unquoted trading companies, and some AIM-listed shares, can qualify for business relief from inheritance tax after two years. Since April 2026, relief on AIM shares has been restricted to 50%, and the full 100% relief on business and agricultural property has been capped by an allowance. These investments can still play a role in estate planning, but the numbers need to be checked carefully. Our Succession & Profit Extraction team can help.

Getting the order right

For most people, the sensible order is to use annual allowances and ISAs first, then pensions, and only then consider higher-risk schemes such as the EIS, SEIS and VCTs. Tax relief should never be the only reason to invest: these schemes carry real risk, and the relief can be withdrawn if the company or the investor breaks the rules.

We work alongside your financial adviser to make sure the tax position is right, that claims are made correctly, and that relief is not lost through avoidable mistakes. We do not provide regulated investment advice. Where you need advice on which investments to choose, we can work with your existing adviser or introduce you to one.

How we can help

Our Tax Efficient Investments service covers income tax and capital gains tax planning, EIS, SEIS and VCT relief claims, pension contribution planning and inheritance tax reviews. Book an appointment to review your position for 2026/27.

This article is for general information only and does not constitute tax or investment advice. The value of investments can fall as well as rise. You should seek professional advice before acting on any of the matters discussed.