Tax Efficient Investments
There are a number of tax efficient investments that can be made by individuals that can help provide relief from income tax as well as capital gains tax. Here at Emulous Accounting, we are experts in advising on the tax implications of such investments.
The seed enterprise investment schemes as well as the venture capital trust scheme broadly are designed to encourage people to invest in unquoted companies exchange for a number of tax reliefs
Seed enterprise investment scheme (SEIS)
- Provides income tax relief at a rate of 50%.
- The investment should be held for 3 years to secure the relief.
- Reinvestment relief may be available if proceeds from the sale of assets are invested in EIS shares.
Enterprise investment scheme (EIS)
- Provides income tax relief at a rate of 30%.
- The investment should be held for three years to secure the tax relief.
- Reinvestment relief may be available if proceeds from the sale of assets are invested in EIS shares.
Venture capital trust (VCT)
- Income tax relief is available at a rate of 30%.
- The investment should be held for five years.
- Dividends received on the first £200,000 invested in VCT shares is exempt from tax.
- Any gains are exempt from tax.
Social investment tax relief
SITR is designed to encourage an individual to invest in social enterprises such as community benefit, societies, a registered charity or community interest companies.
- The investor must not own more than 30% of SITR.
- Income tax relief is given at 30% of the amount invested.
- Investments up to £1million a year qualify.
- The investment must be held for three years to qualify for full relief.
At Emulous Accounting, we are experts in obtaining relief for individuals and companies for the above schemes.
Registered Pension Schemes
Registered pension scheme provides tax benefits for both companies and individuals. The pension fund acts like a money box on which an individual can draw on in retirement.
Companies
Companies receive a corporation tax deduction for any contributions made by the company to a pension scheme which can in turn help reduce your corporation tax bill. Any contributions made by a company to a registered pension scheme on behalf of an employee are a tax-free benefit.
Individuals
Individuals making contributions to pension scheme can obtain tax relief by an extension of their basic rate band meaning more income is taxed at the lower rate of tax. This form of relief is known as “relief at source”.
Employees
Employees can receive tax relief on contributions to occupational pension schemes under “net pay arrangements, This essentially works by taking the total pay of an employee, reducing the pension contributions made and subjecting the remainder to tax.
Life insurance policies
Life insurance products do one of two of things, firstly can pay out a sum of money when someone dies and secondly they can act as an investment vehicle to provide a return on investment.
Life assurance policies allow a tax-free withdrawal of up to 5% of the amount invested per
National savings certificates (NSI)
NSI allows a guaranteed fixed rate of return over their life, which is normally between 3 to 5 years. Interest earned on national savings certificates is tax-free.
Premium bonds
Premium bonds do not guarantee a fixed a fixed or variable rate of return, instead, funds are used to buy a ticket in a raffle. There is effectively a prize draw every month and if the bondholder’s numbers are drawn does he/she win a cash prize. All prizes are tax-free.
Individual savings allowance (ISA)
An ISA is a well know tax efficient investment and provides the following benefits. There are 4 types of ISA
- A cash ISA which can simply be described as a tax-free savings account.
- Stocks and shares ISA, holding a variety of investments.
- An “innovative finance” ISA which holds peer to peer loans.
- A lifetime ISA to save for buying for a first home.
The benefits of The investor cash & stocks and shares ISA are as follows:
- No tax on income from an ISA during your lifetime.
- No tax on capital gains from an ISA during your lifetime.
- No minimum an period.
There are further detailed conditions regarding the above tax efficient investments highlighted above. At Emulous Accounting, we are experts in advising on the optimal use of tax efficient investments.
If you have made an investment or are thinking of making an investment please contact us.
For more detailed information and to arrange a free consultation, please contact us.
13 Balmoral Road
Willesden Green
London
NW25DX
Company Number
11457978
