alt: a pile of indian currency sitting on top of a wooden table
title: Tax Saving Tips for Investors
Discover key tax saving strategies for experienced investors before the tax year ends, focusing on SEIS investments and maximizing your tax-efficient funding.
As the tax year draws to a close, experienced investors find themselves in a critical period to optimize their portfolios for tax efficiency. With impending tax increases and reduced allowances effective from April 6th, 2023, it’s essential to implement tax saving tips investors should consider to minimize their tax liabilities. Here are the most effective strategies to ensure you make the most of the remaining time.
1. Maximize SEIS and EIS Investments
Seed Enterprise Investment Scheme (SEIS)
SEIS is a standout option for tax saving tips investors. It offers up to 50% income tax relief on investments up to £200,000. Additionally, SEIS allows you to halve your capital gains tax bill, making it a highly attractive scheme for those willing to embrace higher risk for substantial tax benefits.
Enterprise Investment Scheme (EIS)
EIS also provides up to 30% income tax relief on investments, with a more generous allowance of up to £2 million per year (or £4 million if investing in “knowledge-intensive” companies). While EIS does not offer tax-free dividends, it allows you to defer capital gains tax, providing flexibility in managing your tax liabilities.
Venture Capital Trusts (VCTs)
VCTs offer up to 30% income tax relief on investments up to £200,000 annually. They also provide tax-free dividends, which can enhance your income stream without additional tax burdens. VCTs are an excellent choice for investors seeking regular tax-free income alongside their tax relief benefits.
2. Utilize Carry Back Options
One often overlooked tax saving tips investors can leverage through EIS and SEIS is the carry back facility. This allows you to offset your current investment against the previous tax year’s liability, effectively reclaiming tax you’ve already paid. To benefit from carry back, ensure that your investments are made and shares are allotted by April 5th, 2023.
Note: VCTs do not offer carry back options, so this strategy is exclusive to EIS and SEIS investments.
3. Protect Your Portfolio from Inheritance Tax (IHT)
Pensions and IHT
Pensions are a reliable method to shield your investments from Inheritance Tax, allowing you to pass on your pension savings to the next generation with favorable tax treatment.
AIM ISAs
Unlike regular ISAs, AIM ISAs offer the same tax-free income and growth benefits but add an extra layer of protection by being IHT free after two years. This makes AIM ISAs a strategic choice for preserving wealth across generations.
4. Fully Utilize Your Capital Gains Tax (CGT) Allowance
The Capital Gains Tax allowance is another crucial aspect of tax saving tips investors should not ignore. For individuals, the allowance has been reduced from £12,300 to £6,000 in April 2023 and will decrease further to £3,000 in April 2024. To maximize this allowance:
- Offset gains: Sell assets that have appreciated and use the CGT allowance to cover the gains. Consider reinvesting in similar assets to maintain your portfolio’s performance.
- Strategic selling: If your investments have grown significantly, selling strategically before the allowance resets can prevent unnecessary tax liabilities.
5. Act Promptly on Investment Opportunities
Time is of the essence when implementing these tax saving tips investors strategies. Popular VCTs and SEIS/EIS opportunities often reach capacity quickly, and delays can limit your options. Ensure you act swiftly to secure your investments and reap the maximum tax benefits available for the current tax year.
6. Leverage ISAs Wisely
While ISAs offer tax-free income and growth, they are not inherently IHT free. To enhance their tax efficiency:
- AIM ISAs: Invest in AIM ISAs to gain the benefits of an ISA while also protecting your investments from Inheritance Tax after two years.
- Transfer existing ISAs: Moving your current ISAs into AIM ISAs can secure the funds against future IHT liabilities, providing a dual layer of tax protection.
7. Explore Oriel IPO for Tax-Efficient Investments
Oriel IPO is revolutionizing the UK investment landscape by offering a commission-free marketplace that connects startups with angel investors through SEIS/EIS schemes. By using Oriel IPO, you can:
- Access curated investment opportunities that maximize your tax savings.
- Benefit from educational resources that empower you to make informed investment decisions.
- Join a supportive community of both novice and experienced investors, enhancing your investment strategy.
Comparison of Key Tax Reliefs
| Scheme | Maximum Investment | Income Tax Relief | CGT Relief/Deferral | Tax-Free Dividends | Tax-Free Growth | IHT Relief | Loss Relief |
|---|---|---|---|---|---|---|---|
| ISA | £20,000 | No | No | Yes | Yes | No | No |
| AIM ISA | £20,000 | No | No | Yes | Yes | Yes (after 2 years) | No |
| Pension | £0 to £40,000* | Up to 45% | No | Yes | Yes | Yes | No |
| VCT | £200,000 | Up to 30% | No | Yes | Yes | No | No |
| EIS | £2,000,000 | Up to 30% | Deferral | No | Yes | Yes | Yes |
| SEIS | £100,000 | Up to 50% | 50% Relief | No | Yes | Yes | Yes |
*Depending on circumstances. Broadly based on total pension value and income in the tax year.
Conclusion
Implementing effective tax saving tips investors before the tax year ends can significantly reduce your tax liabilities and enhance your investment returns. From maximizing SEIS and EIS benefits to leveraging carry back options and protecting your portfolio from Inheritance Tax, these strategies are essential for experienced investors aiming to optimize their financial standing.
Don’t miss out on these opportunities. Act now to ensure you make the most of the remaining time in the tax year and position yourself for a tax-efficient future.
Explore more tax-saving strategies and investment opportunities with Oriel IPO
