Tax matters


Andrew Wholey, Tax Planner


A new tax year is now upon us, and therefore lots of new allowances are now available to make sure the taxman doesn’t get his hands on your hard earned savings.


Annual Individual Savings Account (ISA) Allowance


ISAs allow your investments to grow free of both Income Tax and Capital Gains Tax, so can now save you up to 50% income tax and 28% capital gains tax.


The annual allowance from 6th April is increased to £10,680, and it was announced in the Budget that this limit will increase each year in line with Retail Prices (RPI) which will enable you to shelter more from tax in the future.


Do you wait until the last minute to take out an ISA? There is always the risk that you leave it too late and miss out. We would encourage you to invest into an ISA now to avoid that rush, and allow you to benefit from the potential tax saving much earlier in the year.


Venture Capital Trusts


If you have a significant tax liability, you may be interested in considering Government approved investment opportunities called Venture Capital Trusts (VCT), which carry significant tax breaks for investors.


VCTs provide 30% income tax relief on investments up to £200,000 if held for at least 5 years. Typically these tend to be speculative investments. However, we only use those that aim to reduce this investment risk, and which aim to return your investment to you quickly after the five years are over.


Enterprise Investment Schemes Enterprise Investment Schemes (EIS) are also Government approved investments that


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provide 30% income tax relief on investments up to £500,000 in a tax year provided they are held for at least 3 years. Investment can also be carried back to the last tax year, again up to a limit of £500,000.


These schemes can also be used to defer the payment of Capital Gains Tax which will be attractive for higher rate taxpayers after the increases to CGT in the budget.


Most EIS schemes also qualify for Business Property Relief (BPR) and provide full or partial relief from Inheritance Tax once they have been held for 2 years. This could provide a tax saving of up to 40%.


Whilst EISs typically have higher levels of risk for investors, we use a number of schemes that aim to reduce this risk. You can see that potentially you could benefit from significant tax relief of up to 98% (30% income tax + 28% CGT + 40% IHT).


Inheritance Tax (IHT)


Various allowance and strategies can be adopted to reduce your estate for IHT purposes, but there was the suggestion in the last budget that some of these may be put under more intense scrutiny in the next few years. If there is a message it has to be to start planning now if you want to reduce the IHT your family pays, as it is likely to be more difficult in the future.


One of the most common reasons we find clients don’t want to think about IHT planning is that they don’t want to lose control of their money. We understand this completely but there are a number of schemes available that allow you to gift money whilst retaining a degree of control, or Business Property Relief schemes that allow your assets to become IHT free under your ownership. Just remember that they may not be available for much longer.


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