Finding the right mix of tax-efficient investments
We all have our own financial goals, so it’s important to find an approach that suits our current financial situations and future plans by finding the right mix of investments to achieve them.
By understanding which products are the most tax-efficient, you can make the most of your savings and investments, and minimise how much tax you pay.
Tax-efficient investment wrapper
One option to consider is an Individual Savings Account (ISA). An ISA is a tax-efficient investment wrapper in which you can hold a range of investments, including bonds, equities, property shares, multi-asset funds and even cash, giving you control over where your money is invested.
During his Spending Review and Autumn Statement last year, Chancellor George Osborne announced he would also be extending the list of qualifying investments for the new Innovative Finance Individual Savings Account from Autumn 2016 to include debt securities offered via crowdfunding platforms. ISAs are a highly tax-efficient way to save or invest your money because you don’t pay Income Tax on your interest or Capital Gains Tax on any profits.
Tax year 2015/16 ISA allowance
Between 6 April 2015 and 5 April 2016, you have an ISA allowance of £15,240. The rules now mean you can split the ISA allowance as you wish between a Stocks & Shares ISA and a Cash ISA. The ISA allowance limit will remain at £15,240 for tax year 2016/17.
You don’t have to declare any investments held in ISAs on your tax return. This may not seem like much, but if you have to file an annual tax return, you’ll know that any way of simplifying your financial administration can be very helpful.
Cash ISA Stocks & Shares ISA
How much can I save or invest each year? £15,240 less any amount held in a Stocks & Shares SA. £15,240 less any amount held in a Cash ISA.