Tax is law – it’s the rules. And tax allowances are as much a part of the rules as tax obligations. Do you know and use all that are available to you?

Besides pensions, there are many incentives and reliefs within the UK tax code to incentivise saving and investment. Given your tax bracket, you want every penny to be growing in a tax-advantaged manner, so it’s important to make use of every legal opportunity to ensure you are not paying more tax than necessary.

A few boxes to check

We can’t give specific advice as everyone’s situation is different. For now, here’s a quick rundown of some tax-efficient investment vehicles that you might wish to consider.

1. Investment Savings Accounts (“ISAs”) in the various forms are very efficient tax wrappers, with dividends and savings income being free from income tax. You don’t pay capital gains tax on investments held in an ISA; for investment outside an ISA, there’s currently a £6,000 allowance after which gains are taxed at 20% (28% for residential property).
2. Venture Capital Trusts (“VCTs”) let you access attractive tax reliefs as an incentive to take on the risk of backing early-stage businesses. Investors can claim upfront tax relief equal to 30% of their investment on the first £200,000 invested each year. Dividends and capital gains are also tax-free after the required holding period.
3. Enterprise Investment Schemes (“EIS”) are tax-optimised and attractive investments for investors who are comfortable with higher risk. Here, you can back early-stage companies and access a number of valuable tax reliefs including upfront income tax relief, tax-free capital gains, capital gains tax deferral, and inheritance tax relief.
4. Seed Enterprise Investment Scheme (“SEIS”) structures are similar and offer substantial tax benefits for investors who are prepared to take some risk investing into small unquoted trading companies, all of which can be considered in the optimised portfolio.

Adrian Johnson