Tax Efficient Savings

Get maximum tax-free returns on your investments with the right mix of cash and equity plans. There are a wide range of savings and investment schemes that give tax-free returns:

Following the drastic reforms announced in the 2014 Budget Statement ISAs (Individual Saving Accounts) became NISAs (New ISAs), with the annual investment limit increasing to £20,000 for 2017/18. These subscriptions can be split in any proportion you choose between cash NISAs and stocks and shares NISAs, opposed to the previous 50% cash ISA subscriptions limit.

The 2015 Budget Statement comprised the addition of the ‘Help to Buy ISA’ – a new ISA for first time buyers that offer a government bonus when investors use their savings to purchase their first home. From August 2015 for every £200 that a first time buyer saves, there will be a £50 bonus payment up to a maximum of £3,000 on £12,000 of savings. The bonus will be available for purchases of homes of up to £450,000 in London and up to £250,000 elsewhere.

Junior ISAs became available from 1st November 2011 to all UK resident children under the age of 18 who do not have a Child Trust Fund (CTF). Similar to normal ISAs, Junior ISAs are now able to split the investment between cash and stocks and shares at any proportionate split with an overall annual limit of £4,128.

National Savings (NS&I) schemes comprise index-linked certificates, fixed interest certificates and Premium Bonds. However, NS&I have withdrawn both its index-linked and fixed interest certificates from sale after very strong sales. Premium Bonds remain available up to a maximum investment of £50,000.

VCTs (Venture Capital Trusts) offer tax breaks (30% income tax relief against the sum invested if held for five years together with tax free dividends and freedom from Capital Gains Tax) for those prepared to invest a high proportion in qualifying unlisted trading companies, including those listed on the Alternative Investment Market. Your investment can be up to £200,000 a year and is committed for at least 5 years.

Enterprise Investment Schemes allow you to invest up to £1,000,000 in a single qualifying company worth less than £15 million before making the investment. The sum invested receives 30% income tax relief, qualifies for freedom from Inheritance Tax after two years, freedom from Capital Gains Tax after three years and can provide capital gains tax deferral.

A tax advantaged investment, the Seed Enterprise Investment Scheme (SEIS) is available with the following main features:

  • Income tax relief of 50%
  • Annual investment limit of £100,000
  • 50% CGT exemption for gains on assets disposed of and reinvested in SEIS in 2017/18 tax year

As investments, VCTs, EISs and SEISs carry a certain amount of risk and are generally most suited to those with specific circumstances, knowledge and experience.

Impartial independent financial advice is vital in this area. Contact us to arrange a free initial consultation to explore all the opportunities.

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