Tax Efficient Investment
What is Tax Efficient Investment? The government incentivises taxpayers to invest in specific ways by reducing the tax paid on those investments. Each investment will have one or more tax incentives, making them ideal for some clients. Pensions and Individual Savings Accounts (ISAs) are the most apparent tax-efficient investments. Some other tax-efficient investments, such as Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS), and Seed EIS (SEIS), Business Property Relief (BPR) and Alternative Investment Market (AIM) portfolios, can come with unnecessary risks. Different minimum investment terms and planning horizons may not suit your circumstances.
Why do we do it? Over your lifetime, one of your most significant costs will be tax. Whilst this can be framed as the government quantifying your financial success in monetary terms, it is potentially better to reduce your tax bill by investing in a more tax-efficient way.
What do we need from the client? We, therefore, need to understand your current financial situation and objectives to build an appropriate tax-efficient investment plan.
What will we produce? Whilst this topic has been split from the investment topic for you, it is wholly incorporated within the same financial plan.
What tools do we use?
- MICAP – we use a provider called MICAP to provide data on Alternative Asset Classes; we define these as tax-efficient investments – namely VCTs, EIS, BPR portfolios and AIM portfolios. The analysts at MICAP perform a deep dive into the hard and soft facts on most alternatives, allowing us to conduct deep research and have confidence in our choices for clients.
- Dynamic planner – allows us to risk map your existing portfolios to our risk yardstick, showing us if the portfolio meets your risk expectations and suits your goals and investment preferences. It also allows us to run psychometric tests with you, to help us establish your risk preferences, capacity and ability to take risks, and ethical choices. The tool works as both an analyser and a discovery tool. It also allows us to scour the market for the most appropriate custodians/platforms to house your assets.
Note. Levels and bases of, and relief from, taxation are subject to change. Because these investments may go down in value as well as up, you may not get back the full amount invested. Past performance is not a reliable indicator of future results.