Posted on: 22nd December 2021
Investors in the UK choose to support businesses in growth for many reasons – from philanthropic ventures for impact or simply to see the financial return. In between is where many people fall into, and aiding them is a strategy of investing in a tax-efficient way into high growth SMEs.
It is an approach that allows for an investor to support burgeoning British businesses whilst mitigating risk through incentives and reliefs that are tax-efficient. It also allows for greater upside benefits.
When looking for ways to invest in a tax-efficient manner, several ways provide an ability to choose between what suits your priorities and circumstances.
The most widely recognised and discussed ways for savers to invest capital in a tax-efficient manner. ISA accounts for several products available allowing for savers to benefit from many reliefs, set up by the government to actively encourage saving and– resulting in generous tax breaks on offer.
Capital that is invested into an ISA can grow tax-free, resulting in any income being exempt from respective taxes – including interest from IFISA or dividends or capital for S&S ISAs.
One of the most well-known tax-efficient ways to invest is through your, with contributions up to the annual allowance of £40k being made with tax relief at the prevailing rate of income tax.
Your pension pot is permitted to grow in a tax-free environment. Once you have paid into a pension scheme, the amount can be invested into allowable assets – providing an income or growth without the tag of tax included. In the case of pension schemes, tax relief is provided at the prevailing rate of income tax (a £100 contribution would cost a basic rate of £80 and additional rate taxpayers £55).
Gains made from investments through a pension scheme will be free from capital gains, so shares in a pension can achieve growth without capital gains pay risk when sold.
Venture Capital Trusts (VCTs)
Along with Enterprise Information System and SEIS, Venture Capital Trusts (VCT Manchester) offers similar tax reliefs and structures for tax-efficient investing in early-stage businesses to promote the growth of the next big British company.
The approach used will depend on the investor and their various factors, such as the amount invested and their risk aversion. Some investors may feel comfortable taking a more active role in the company and investing a higher amount, whilst others will feel more comfortable investing a smaller amount by grouping together with other investors with equity crowdfunding.
These are just some of the ways to relieve taxes that investors can take, and they are not the only ones open to them. Contact the team at tax relief and other investment advice Manchester that are open to investors.today to discuss the many avenues that can be taken on capital gains relief, income