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Tax efficient saving and investment strategies

7 January 2019 No Comment

Getting an acceptable yield from any investment has been an enormous challenge over the past decade or so, since interest rates ground almost to a halt, both in the UK and across the wider western world.

This has caused investors to think hard about their investment strategies in two very particular ways. One it to look at innovative investment types that would have seemed beyond the purview of the casual or private investor 20 years ago. The other is to ensure that when they do invest, they do so in the most efficient way possible, reducing tax exposures that could otherwise make a modest return miniscule. Here are some effective ways of doing so.

ISAs

The Individual Savings Account or ISA is probably the best-known tax-free investment product around. The concept has been with us for almost 20 years, and was initially seen more as a tax-efficient alternative to a savings account. This type of basic cash ISA is still around today, but there is a growing trend towards consumers instead opting for a Stocks and Shares ISA.

Both products allow for tax-free capital growth, and there is a whole suite of variations available. You can find out more from a professional third party advisor, who will outline the rules and limits in detail.

Pensions

Another saving and investment tool that should be familiar enough to everyone is the humble pension. Anyone can make pension contributions up to either their annual salary or £40,000 – whichever is lower – and it will be subject to tax relief at your rate of income tax.

Your pension fund grows in a tax-free setting, so once you made your contributions, the money can be invested in allowable assets that deliver either a regular income or growth, all without the need to pay tax.

This is the age of the entrepreneur, and there are a variety of pension products aimed at this sector, including Small Self-Administered Schemes (SSASs) and Self-Invested Personal Pensions (SIPPs).

Venture Capital Schemes

For investors looking for something a little out of the ordinary and an opportunity to really see their investment money make a difference, there are several tax efficient investment schemes that are designed for those wishing to invest in early stage British businesses.

There are different ways for investors to use these schemes, and each is dependent on how much is being ploughed in and the investor’s risk appetite. For example, experienced investors with high net worth might invest directly into a business, while anyone new to this area, or looking to invest a smaller amount, can team up with other investors in a range of equity crowdfunding projects via platforms like Kickstarter.

Be tax smart with your investments

There is no shortage of possibilities out there when it comes to tax efficient investment. Regardless of how much you are looking to invest and whether you are looking for short term return, long term security or just the opportunity to use your money to make a difference, there is certain to be a strategy that is right for you.

 

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