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Tax Efficient Savings and Investments

There are a number of different ways to make tax efficient savings and investments including the following:

  • Individual Savings Account (ISA) or for long term savings through a personal pension.
  • Acquiring shares in Enterprise Investment Scheme (EIS) companies
  • Acquiring shares in Venture Capital Trusts (VCT).

Any individual can invest up to £10,200 in an ISA per tax year.  Interest, dividends and gains held within ISAs are not liable to income tax or capital gains tax.

It is possible for an individual to get tax relief on contributions made into their personal pension plan each year up to a maximum of £50,000 per annum from April 2011.

Subscribing for shares in an Enterprise Investment Scheme (EIS) company can provide income tax relief of up to 20% on an investment of up to £500,000 per annum.  There is also a capital gains tax relief on the subsequent sale of the shares provided they are held for at least three years, and the possibility of deferring gains arising on other capital disposals.

An investment in shares in a Venture Capital Trust (VCT) provides income tax relief of up to 30% on a maximum investment of £200,000 per annum.  Subject to a five year retention period the dividends paid by a VCT are exempt from income tax and the disposal of shares in a VCT are exempt from capital gains tax.

Benefits of tax efficient savings and investments:

  • Liability to tax on Income can be reduced (ISAs/VCTs).
  • Tax relief can be obtained which reduces the individual’s overall tax liability for a tax year (EIS/VCT).
  • Tax relief can increase the capital values of savings/pensions (ISA/pension contributions).
  • Some reliefs can also be used to defer the payment of capital gains tax (EIS).

More Information

For further advice do not hesitate to contact:

Sheena Anderson  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Lynn Gracie  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Or call 01224 625111