Tax efficient investments

Produced by Tolley
  • (Updated for Budget 2021)

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Tax efficient investments
  • Overview
  • Regulated investment advice
  • Know your client
  • Investments with tax exempt income or gains
  • Individual savings accounts
  • Lifetime ISA
  • Help to buy ISA
  • Junior ISA
  • Child trust funds
  • More...

Overview

Tax efficient investments provide the investor with relief from one or more taxes for the current tax year, or are exempt from income tax and / or capital gains tax. Some investments have both attributes.

The following tax efficient investments are discussed below:

  1. individual savings accounts (ISA), including the lifetime ISA, help to buy ISA and junior ISA

  2. child trust funds

  3. National Savings products

  4. life assurance polices or investment bonds

  5. venture capital schemes, including enterprise investment scheme, seed enterprise investment scheme, venture capital trusts and social investment tax relief

  6. pension contributions

Each type of investment has its own set of qualifying conditions, which generally includes a cap on the amount that can be invested in a particular period. This may be the tax year, or another period. The client’s holding of tax efficient investments needs to be considered as part of the tax year-end planning exercise, to achieve tax savings for the current year and potentially to manage the taxable income for future periods.

Regulated investment advice

Investment advice is a regulated activity under the Financial Services and Markets Act 2000. This covers advising on buying, selling or subscribing for a particular investment.

Outlining the broad tax implications of the different categories of investments, such as enterprise investment scheme (EIS) shares or individual savings accounts (ISA) is not a regulated activity. However, if you were to advise your client to take out these investments or, for instance, partially surrender their non-qualifying life insurance policy, this would be a regulated activity.

To carry on a regulated activity, you must either be an authorised person under FSMA 2000, or your communication with the client must be approved by an authorised person. The regulator is the Financial Conduct Authority. You can find out more information on the FCA website.

Also, see the Regulated investment advice guidance note.

Know your client

Several of the tax efficient investments discussed in this guidance note can only be acquired by individuals who are resident in the UK for tax purposes. If the client leaves the UK,

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