End of Tax Year Checklist

End of Tax Year Checklist

Make the most of the tax year end with these helpful tax allowance tips. Please note tax rules are subject to change over time and the benefits of these tax wrappers depend on individual circumstances.

  • Open an ISA (Individual Savings Account) – You can shelter upto £15,240 from income and capital gains tax this year. Remember if you dont lose your ISA allowance for the tax year, you lose it!
  • Open a Junior ISA – The junior ISA allowance is currently £4,080 and offer similar tax benefits to adult ISAs. All children are now eligible for these new tax wrappers.
  • Use your Personal Allowance – Reports are suggested that the Chancellor is considering cutting tax relief in an effort to reduce costs, this could mean higher rate and additional rate tax payers lose out.
  • Use your Capital Gains Tax Allowance (CGT) – This tax year you can realise £11,100 without paying tax, if you hold shares or funds outside of a tax wrapper it could be a good time to sell some.
  • Reduce your Inheritance Tax (IHT) – Make gifts of upto £3,000 from capital each tax year, which will be exempt from inheritance tax. You can also carry forward any unused allowance from last tax year.
  • Seek advice – if you need help in making the most of your tax shelters and allowances, speak to an Independent Financial Adviser who can assist you.
Enterprise Investment Schemes

Enterprise Investment Schemes

Enterprise Investment Schemes (EISs)

These schemes were launched with the idea of helping smaller companies who carry higher risks to enhance their growth. The main objective was to attempt to inject more finance into these companies to try and further their development.

In order to raise this finance, EISs offers tax advantages to investors when purchasing new shares within these smaller companies. These schemes offer more tax relief than other investment opportunities as they often hold a considerable amount of risk due to investing within one specific company, rather than spreading the risk over several smaller companies such as within a VCT Scheme.

These schemes are usually aimed at individuals who can afford to tie up their money for a longer period of time and individuals who would feel the benefit a considerable amount of tax relief.

Main Benefits

  • Individuals can claim up to 30% relief for income tax amounting to a maximum investment of £1,000,000 (up to £300,000 relief).

This tax relief can only be claimed if you have held the shares usually for at least 3 years (from the date of issue) and if you are not connected to the company.

  • Exemption from Capital Gains Tax

This scheme enables you to have relief on the gains you make from your investment and may even enable you to defer your capital gains tax depending on your circumstances.

  • Relief of 100% can be claimed from inheritance tax

This relief applies as long as you have held these shares for at least 2 years and still own them at death.

  • Loss relief of up to 45% can be claimed

If shares are sold at a loss, this amount, less any relief from income tax allowable, can be set against income of the year in which they were disposed of, or any income of the previous year, instead of being set off against any capital gains.

The information provided should be treated solely as a guide and you should seek professional advice regarding your own personal circumstances and objectives.  

Venture Capital Trusts VCT

Venture Capital Trusts VCT

Venture Capital Trusts were introduced in order to encourage individuals to invest in a variety of smaller companies with added risk, which are not listed on the Stock Exchange.  The aim was to help these smaller companies with further development.

How They Work

VCTs pool together your investments, along with other individuals’ investments with the objective of spreading the risk over a range of small companies. Individuals can invest by purchasing shares from investors from an established trust or you can also subscribe to new shares. The tax relief obtained from these investments often play a big role in encouraging individuals to invest within these smaller companies.

Tax Relief

  • There is a 30% Income Tax relief on new ordinary shares each tax year on investments up to £200,000.
  • There is no Income Tax to be paid on dividends received from ordinary shares.
  • There is no Capital Gains Tax (CGT) to be paid from the gains of your investment.

In order to feel the benefit from income tax relief, you will have to of held shares in a Venture Capital trust for at least 5 years. As long as the VCT preserves its status, there is not a minimum period where you need to hold shares to obtain the relief from CGT.

Risk & Charges

It is important to be aware that your investment could go up or down in value. Although these smaller companies could offer higher returns, the investment could result in you getting back less than you put in due to the risk involved. Charges can often also be higher for VCTs compared to alternative investments.

The information provided should be treated solely as a guide and you should seek professional advice regarding your own personal circumstances and objectives.