With the strength and depth of expertise we have, we're able to advise on an extensive range of different types of investment. This means we can help you make the most appropriate choices to suit your personal circumstances.
Below is further detail on the investment types we deal with. It's not an exhaustive list but it does cover the vehicles we use most regularly:
Collective Investment Funds
A collective investment is where lots of people pool their money into a fund, which is then invested in one or more types of asset by a fund manager. Collective investments allow you to access a wider range of investment opportunities normally reserved for larger investors. Pooling your money with others also reduces your personal risk.
Collective investments often underpin many types of investment plan, such as a stocks and shares ISA, or a pension for instance. Outside the protection of a plan, they are normally subject to more tax, but the treatment of capital gains remains attractive in comparison to income, particularly if you're a higher or additional rate taxpayer.
Individual Savings Accounts (ISAs)
The investment limit for 2017/18 is £20,000, an increase of £4,760 over the current limit. Any subscriptions you make to an NISA from 6 April 2017 will count against the £20,000 ISA limit for 2017/18.
This is only available to people aged between 18 and 39 and is designed to help with a first property purchase or with retirement. The annual maximum contribution is £4,000 and will count towards the £20,000 ISA contribution limit for 2017/18. The government will add a 25% bonus, worth a maximum of £1,000 each year, up to the age of 50. Investment rules are similar to that of a normal ISA with no UK income tax or capital gains tax.
Parents and others can contribute to a junior ISA for children up to the age of 18 who do not have a child trust fund. The overall contribution limit is £4,128 a year, and children can have one cash and one stocks and shares junior ISA at a time subject to this limit. Funds are locked in until the child reaches 18.
Investing in a pension is an attractive proposition, not only because a pension is a highly tax-efficient form of saving but also - for money purchase schemes - because new rules introduced in April 2015 give you much more flexibility around how and when you can access your funds.
Tax efficient contributions
When paying into a pension, you receive tax relief on any contributions that you make. This is at the highest rate of income tax that you pay, provided that the total gross pension contributions paid into your pension don't exceed the lower of:
- your annual earnings; and
- the annual allowance (currently maximum of £40,000).
If you are 55 or over and have a money purchase pension plan you will be able to take 25% of your pension as tax-free cash, and then take the remaining 75% as:
an annuity - you buy an insurance policy that gives you an income for the rest of your life
flexible income - your pension stays invested while you take money from it
cash - you take your whole pension in one go
There are two ways you can get a flexible income from your pension. The main difference is how you can take the tax-free part:
Any payments from the remaining 75% are taxable as income at your marginal rate.
There are two types of UK life policy which can provide a useful tax shelter once other opportunities, such as ISAs, have been exhausted:
These are lump-sum investments, which enjoy the same internal tax regime as MIPs. Any profits, are subject to a personal higher additional rate tax charge, but there is scope for tax-deferred withdrawals.
Maximum Investment Plans (MIPs)
MIPs are regular investment plans, where the funds are currently subject to a special life company tax rate of no more than 20% on income and inflation-adjusted capital gains. You have no personal tax liability on any MIP profits at maturity, typically after ten years.
Venture Capital Trusts (VCTs)
You can get income tax relief of 30% by subscribing up to £200,000 for shares in VCTs in 2017/18. Gains are generally exempt from capital gains tax (CGT). VCTs are investment trusts that invest in a range of relatively small trading companies. It is important to remember that VCTs are high-risk investments and so may be difficult to sell.
It is important to remember that VCT shares are high-risk investments as they involve investing in smaller companies and can be complex.
Enterprise Investment Schemes (EISs)
An EIS gives tax relief for investing in new shares in relatively small qualifying trading companies not listed on any stock exchange. Benefits include:
- income tax relief at 30% on up to £1,000,000 invested in 2017/18.
- exemption from CGT on share gains after three years.
- the possibility of deferring CGT on any size gain on the disposal of any asset, by reinvesting in shares that qualify under the EIS. Any gain must be reinvested. You can use an EIS investment to defer gains made up to three years earlier.
It is important to remember that EIS shares are high-risk investments as they involve investing in smaller companies and can be complex.
Tax relief depends on your individual circumstances and may be subject to change in the future. The availability of tax relief, VCTs and EIS's depends on the companies invested maintaining their qualifying status.
All investments carry an element of risk. You may not get back the full amount of your original investment.
The Financial Services Authority does not regulate tax advice, will writing and some forms of buy to let mortgages.