Tax efficient investments for private clients

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No doubt you are familiar with savings products such as ISAs and pensions. These products offer generous tax advantages because the government wants to encourage you to save for your future. When you invest through an ISA, for example, all the returns you make are free from all personal income tax and capital gains tax. Similarly, when you save into a pension, you normally receive tax relief on your contributions (up to certain limits).

Many people, however, are unaware that there are other tax efficient ways to invest. These include ‘tax led’ investments such as Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS), both of which were introduced to encourage investment in smaller companies. Allowances are high compared to other tax advantaged products, although they are specialised and are only suitable for higher-risk investors.

The benefit of Business Property Relief, a generous relief from inheritance tax available to owners of and investors in businesses, should also not be overlooked. Therefore, seeking advice from a qualified adviser is very important.

Detailed below is a summary of the benefits of Tax led investments:

Benefits Venture Capital Trusts Enterprise Investment Schemes BPR/IHT Qualifying Investments
Maximum investment £200,000 £1 million Unlimited
Income tax relief 30% 30% No
CGT deferral No Yes No
Tax free income Yes No Possibly
Tax free gain Yes Yes Possibly
IHT free No After 2 years After 2 years
Loss relief No Yes Possibly

If you are interested in looking at the potential benefits to be gained from such investments please do get in touch with Sue Stephens for more detail.