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All investments held in ISAs are free of CGT and there is no
minimum investment period for funds. However, some plan
managers offer incentives, eg. better rates of interest, in return
for a commitment to restrictions such as a 90-day notice period
for withdrawals and it is worth shopping around.
Lifetime ISA
Any adult under 40 is able to open a Lifetime ISA. They can
save up to £4,000 each year and will receive a 25% bonus from
the government for every pound they put in, up to the age
of 50. Funds can be used to save for a first home worth up to
£450,000 or for retirement.
Help to Buy ISA
Help to Buy offers a tax-free savings account for first-time
buyers saving for a home. Savings are limited to a monthly
maximum of £200, with the option to deposit an additional
£1,000 on opening the account.
The government provides a 25% bonus on the total amount
saved including interest, capped at a maximum of £3,000 on
savings of £12,000, which is tax-free. Interest received on the
account will be tax-free. The bonus can be put towards a first
home located in the UK with a purchase value of £450,000 or
less in London and £250,000 or less in the rest of the UK. Once
an account is opened there are no time limits on how long an
individual can save for, or when they can use their bonus.
The Innovative Finance ISA
This ISA is designed to encourage peer-to-peer lending. It can
be offered by qualifying peer-to-peer lending platforms in
accordance with the ISA Regulations. Loan repayments, interest
and gains from peer-to-peer loans will be eligible to be held
within an Innovative Finance ISA, tax-free. Returns have the
potential to be significantly greater than on Cash ISAs, but they
will carry a greater degree of risk.
Some alternative investment schemes
Although generally higher risk, the tax breaks aimed at
encouraging new risk capital mean that the following schemes
could have a place in your investment strategy.
Enterprise Investment Scheme (EIS)
Subject to various conditions, EIS investments attract
income tax relief, limited to a maximum 30% relief on
£1m of investment per annum. The £1m annual limit is
increased to £2m for individuals making EIS investments in
knowledge-intensive companies (KICs), provided that anything
above £1m is invested in one or more KICs. A deferral relief is
available to rollover chargeable gains where all or part of the
gain is invested in EIS shares (within the required period).
Although increases in the value of shares acquired under the
EIS are not chargeable to CGT (as long as the shares are held for
the required period), relief against chargeable gains or income is
available for losses.
Venture Capital Trusts (VCTs)
These bodies invest in the shares of unquoted trading
companies which would qualify for receipt of investment under
the EIS. An investor in the shares of a VCT will be exempt from
tax on dividends and on any capital gain arising from disposal
of the shares in the VCT. Income tax relief of 30% is available
on subscriptions for VCT shares, up to £200,000 per tax year, as
long as the shares are held for at least five years.
Seed Enterprise Investment Scheme (SEIS)
This provides income tax relief of 50% for individuals who invest
in shares in qualifying companies, with an annual investment
limit for individuals of £100,000 and a cumulative investment
limit for companies of £150,000, and provides a 50% CGT relief
on gains realised on disposal of an asset and invested through
the SEIS.
A gain on the disposal of SEIS shares will be exempt from CGT
as long as the shares obtained income tax relief, which has not
been withdrawn, and are held for at least three years.
Your next steps: contact us to discuss…
•
Creating a savings and investment strategy
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Establishing and achieving your savings goals
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Tax on income and gains
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Investing for your retirement
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Tax-free investments
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The tax consequences of different investments