Your Winter Newsletter 2019

Your Adviser Discusses


It is Not To Late to Take Advantage of Year End Tax Allowances

The ups and downs of the investment market over the last 12 months may not have filled investors with a huge amount of optimism.

However, viewed through a longer term lens, following a selected investment strategy remains the most effective way to employ your funds in order to keep pace with or exceed the rate of inflation over time. 

Keeping abreast of other aspects to investment and tax incentives present additional opportunities and can be taken advantage of where possible and which present no risk. Tax incentives are a specific area where your Financial Adviser will add value, without a downside.

We would always encourage you to plan early to use up your tax allowances but you do have up until midnight on 5th April 2019 to use up some of the following:


Pension Annual Allowance

All UK taxpayers have an annual pension allowance from the day they are born up to the age of 75 for contributing into a pension and receiving tax relief. If you have not utilised your allowance for the current tax it’s not to late, please feel free to contact us to discuss.


ISA Allowance

We all have an annual allowance of £20,000 we can put into an ISA. This allowance cannot be carried forward into the next tax year, so if you have not utilised, please get in touch to ensure it is completed by 6th April.  


Capital Gains Tax (CGT) Allowance

The current capital gains tax allowance is £11,700 per annum for 2018/19 and is often overlooked. So if you have any investments outside of ISAs, Pensions or a tax-efficient product, you may want to consider crystalising some of the gains on these in order to make use of this allowance. As with ISAs, CGT cannot be carried forward and must be used in each tax year.

In addition to the above allowances, there are some other exciting tax incentives promoted by HMRC you can also take advantage of to help to reduce your tax bill. 

Despite press headlines and the leak of offshore tax avoidance records linked to prominent individuals – the ‘Paradise Papers’-  there are several government-endorsed allowances, reliefs and exemptions promoted by HMRC. The government offers these reliefs to encourage investment in specific sectors and are designed to be beneficial to the investor and the UK economy.

We recently held a seminar with an investment company specialising in these incentives and list some of the associated products briefly below for you.


Venture Capital Trusts (VCTs)

A VCT is a listed company in which you invest. Upon investment, you will receive a tax rebate of up to 30% of your investment from HMRC up to the level of income tax you paid in that tax year. The maximum you can invest in any one year is £200,000 and you must hold that investment for at least five years in order to benefit from the Income Tax relief. Dividends paid from a VCT are tax-free.


Enterprise Investment Scheme (EIS)

The EIS is designed to help smaller, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify. For the investor, it’s a tax-efficient way to invest in small companies – up to £1,000,000 per year with Income Tax relief of 30% (again, restricted to a maximum of the value of income tax you pay). The minimum holding period is three years. EIS’s have other tax advantages - they are exempt from CGT, you can obtain loss relief against other investments if your EIS makes a loss, and you can defer CGT on other investments if you invest the gain in an EIS.

What makes it even more attractive is the ‘carry back’ facility where investments can be applied to the preceding tax year i.e. the investment is treated as if it is made in the previous tax-year and you get relief on the previous years’ Income Tax.


Business Relief (BR)

BR has been an established part of inheritance tax (IHT) legislation for over 40 years. It is a benefit to some small business owners but is also used as an IHT planning tool for other investors. BR planning can be used:

if you do not want to give away large sums of money before death

you want to give the inheritance you plan to leave behind the chance to grow

you want the money you invest to become inheritance tax exempt quickly

Once you have set up an investment and it qualifies under BR rules, you can be confident these funds can be passed onto your beneficiaries free from 40% Inheritance Tax upon death. 

This is a very brief overview of some of the tax planning options available. To find out more please get in touch to discuss your alternatives and help you plan for a tax-efficient future.