Considering Tax Efficient Investments

The tax efficiency of any investment needs to be carefully analysed from your own personal point of view and circumstance. Not all investments that offer tax benefits and incentives will necessarily benefit you.

Let’s consider a qualifying life assurance policy like an endowment to illustrate this point; while generally being tax efficient for basic rate tax payers for example, this investment vehicle is actually tax IN-efficient for low rate tax payers! So approach the subject of tax efficient investments with your eyes open!

Ask yourself this: are you attracted to your investment choice simply because it claims to be tax efficient? Would you be interested in this investment vehicle if it were not for the ‘tax break’ claims? What type of saver and investor are you? Are you considering a high risk investment when you’re generally a ‘safe’ investor?

Here are some of the main tax efficient vehicles for your savings that you may come across; they have been divided according to whether they offer tax exemption on any gains accrued and those investment vehicles that afford you tax deductible contributions.

Income/Capital Gains Tax Exempt Investment Vehicles: –

ISAs – Individual Savings Accounts

PEPs – Personal Equity Plans *

TESSAs – Tax Exempt Special Savings Accounts *

Friendly Society Investments

Some National Savings products

* Please note that new PEPs and TESSAs cannot be taken out. Existing PEP contracts can be administered indefinitely. Existing TESSAs can be contributed to up to maturity and capital can be transferred to Tessa Only ISAs (TOISAs)

Investments Accepting Tax Exempt Contributions

Personal & Occupational Pensions which have been “exempt approved”

Enterprise Investment Schemes – EIS

Venture Capital Trusts – VCTs

We recommend that you contact a fully qualified independent financial adviser for impartial personalised advice.

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