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Investments and Tax Free Savings

ISAs

 

Individual savings accounts (ISAs) provide an income tax and CGT free form of investment. The maximum investment limits are set for tax years

 

To take advantage of the limits available for 2013/14 the investment(s) must be made by 5 April 2014

 

In practice most ISA providers sell ISAs solely investing in stocks and shares. Banks and building societies provide cash ISAs.  16 and 17 year olds are able to open cosh ISAs.

 

Other Investments

 

There are a variety of other tax efficient savings products, many of which work in completely different ways. You should consider your needs in detail before entering into any commitments. Examples include:

 

National Savings products– these are taxed in a variety of ways.

Some, such as Savings Certificates, are tax-free.

 

Single premium insurance bonds

and ‘roll up’ funds provide a useful means of deferring income into a subsequent period when it may be taxed at a lower rate.

 

The Enterprise Investment Scheme (EIS)– income tax relief at 20% is available on new equity investment (in qualifying unquoted trading componies) of up to £500,000 in 2010/11. CGT exemption is given on shares held for at least three years. Where gains are reinvested in EIS shares, the capital gains realised on the sale of any chargeable asset (including quoted shares, holiday homes etc) can be deferred.

 

Venture Capital Trusts (VCT)invest in the shares of unquoted trading companies. An investor in the shares of a VCT will be exempt from fox on dividends and on any capital gain arising from disposal of the shares in the VCT. Income tax relief currently at 30% is available on subscriptions for VCT shares, up to £200.000 per tax year, so long as the shares are held for at least five years (three years for shares issued before 6 April 2006).

NB – There is no possibility of deferring capital gains into VCT shares as there is with EIS.

When choosing between investments always consider the differing levels of risk and your requirements for income and capital in both the short and long term. An investment strategy based purely on saving tax is not appropriate.

 

How we can help

 

Whilst some generalisations can be made about pension and investment advice it is always necessary to tailor any advice to your personal situation therefore please see below to contact KRA so we can arrange a No obligation FREE initial meeting. 

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