Tax efficient investments

With the tax burden looking set to increase in the coming years, and the top rate of tax already up to 50% it is important to look at ways of legitimately sheltering your hard earned cash from tax.

Let’s look at the obvious ones first.

Individual Savings Accounts (ISAs)
Many people have opened ISAs, either cash or investment, and are familiar with the new limit of £10,680 a year (with a maximum of £5,340 into a cash ISA).

Let’s remind ourselves of their advantages:

Interest from bank accounts, Gilts and Bonds is tax free. Outside an ISA a highest rate taxpayer is going to lose half his interest in tax, whereas that money held in an ISA has no tax deducted. That’s a valuable saving.
 
Investment gains are not taxed. With the new allowance it will be possible to build up sizeable ISA funds, so this could be very useful.

Any withdrawals from an ISA are entirely free of income tax. This makes them an excellent way of supplementing income, for example in retirement.

Pension Plans
The rules on contributions have become more complex but the vast majority of earners will get tax relief at their highest rate on their pension contributions. It is possible to pay up to a whole year’s earnings into your pension.

Pension income is taxable but 25% of the pension fund can still be drawn out as tax free cash.

More experienced investors may also want to look at more specialist tax favoured investments such as Venture Capital Trusts and Enterprise Investment Schemes. These offer income tax relief at 30% and 30% respectively as well as other tax benefits, but it should be borne in mind that these are at the higher end of the risk spectrum.

How can we help?
In this area it is important to get expert advice. We have many years experience in tax favoured investments. With Alexander Sloan’s tax specialists to draw on if required, we can tailor schemes to suit your circumstances.

Alexander Sloan Financial Planning Ltd   
Email: colin.rodger@alexandersloan.co.uk

Authorised and Regulated in the UK by the Financial Services Authority

A Company Registered in Scotland No. 197380