New tax year: tax-saving checklist
With the start of the new tax year, some taxes have gone up as planned, leaving high earners and investors feeling the pinch.
In particular, capital gains and dividend allowances have been cut for the second year running. The capital gains allowance is now £3,000 – it was £12,000 until April 2023. And the dividend allowance has been cut to £500 – you may recall it was £5,000 as recently as 2017/18.
Meanwhile, frozen thresholds push ever more of us into higher income tax brackets.
What could help experienced investors mitigate the effects of the UK’s highest tax burden since 1949 – and save tax?
Here are five ideas to consider.
Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. When you invest in early-stage businesses you should expect some to fail. VCTs, EIS and AIM investments are high risk and only for experienced investors. You could lose all your capital: you should not invest money you cannot afford to lose.
Five ideas to consider:
- Invest in a VCT – up to 30% income tax relief and tax-free dividends
- Invest in EIS – save up to 30% income tax this tax year or the last, plus defer capital gains made elsewhere
- Invest in SEIS – save up to 50% income tax and capital gains tax
- Invest in an early-bird AIM IHT ISA – you could potentially make the new tax year’s subscription IHT-free
- Make the most of your ISA and SIPP (Self Invested Personal Pension) allowances – invest in our exclusive portfolios, managed for you by our investment experts.
Tax rules can change and benefits depend on circumstances.
1. Invest in a VCT – up to 30% income tax relief and tax-free dividends
When you invest in a VCT, you may claim up to 30% income tax relief for the tax year for which you make the investment. You can claim back tax you’ve already paid over the year. Alternatively, if investing early in a tax year, you could ask HMRC to adjust change your tax code and have your subsequent income tax reduced each month under PAYE.
Furthermore, any dividends paid out from VCTs are tax-free – so won't use up your dividend allowance, which has been reduced to £500 from 6 April 2024.
The sooner in the tax year you invest in a VCT, the sooner you may start benefitting from any dividends it may pay – although please note VCT dividends are variable and not guaranteed.
2. Invest in EIS – save up to 30% income tax this tax year or the last, plus defer capital gains made elsewhere
When you invest in EIS, you can offset up to 30% income tax relief against your current year’s tax bill – or the previous year’s if you use carry back. Furthermore, any growth is tax free and the investment should be IHT free after two years. You may also defer tax on capital gains made elsewhere, for as long as that gain is invested in an EIS-qualifying investment. If things don’t work out as planned, you can use loss relief to offset losses against income.
What is EIS/SEIS carry back?
EIS and SEIS (covered below) investments offer a “carry back” facility. You can elect for all or part of your EIS/SEIS shares acquired in one tax year to be treated as though they had been acquired in the previous tax year.
This gives investors the option to offset the tax relief against income tax from the previous tax year. Potentially, this means you could be able to apply the relief to your 2023/24 income tax bill, depending on the timing of deployment.
3. Invest in SEIS – save up to 50% income tax and capital gains tax
The most generous tax reliefs are reserved for investing in the youngest – and therefore highest-risk – companies, under SEIS.
These include up to 50% income tax relief, with the option to carry back to the previous year, and up to 50% capital gains tax relief.
As with EIS, any growth is tax free, the investment should also be IHT-free after two years and you could claim loss relief if things don’t go to plan. Bear in mind tax rules can change and benefits depend on circumstances.
Depending on the timing of deployment, you could be able to claim up to 50% income tax relief for the current tax year 2024/25, or carry back to 2023/24 – not guaranteed.
Free factsheet: VCTs, EIS and SEIS tax reliefs compared
This short and simple factsheet explains and compares side-by-side the current tax treatment of these three government-endorsed schemes.
Find out:
- What VCTs, EIS and SEIS are, in a nutshell
- Their risks and benefits
- How you could claim up to 30-50% income tax and other tax reliefs
- How you might be able to claim back some of last year’s tax
- How you might receive tax-free dividends
4. Invest in an AIM IHT ISA – your investment could potentially be IHT-free after two years
ISAs are not normally IHT free. However, when you invest in an AIM IHT ISA, your money could potentially be IHT-free after two years, provided you still hold the investment on death, in addition to the usual ISA benefits of tax-free income and growth. This is because certain AIM shares are eligible for Business Property Relief. Please note: AIM shares are more illiquid and volatile than those listed on the main market, please ensure you are comfortable with this before investing.
5. Make more of your ISA and SIPP allowances – with two Managed Portfolio services, exclusive to Wealth Club
You can now invest your ISA or SIPP in long-term growth opportunities selected and managed for you: our Quality Shares Portfolio and Wealth Club Portfolio Service.
You can invest new money or transfer existing investments. Note: these discretionary managed portfolios are long-term investments which can fall as well as rise in value and returns are not guaranteed. Pensions are long-term investments: you cannot normally access your funds before age 55 (57 from 2028). Before making any contributions you should check you are eligible.
Quality Shares Portfolio – ISA, SIPP or general investment account
The Quality Shares Portfolio is managed by Charlie Huggins, who before joining Wealth Club as Head of Equities ran the £300+ million HL Select UK Growth Shares fund at Hargreaves Lansdown.
The portfolio comprises 15-20 global listed companies Charlie has observed for a long time, invests his own money in, and has chosen for their resilience, financial strength and long-term growth potential. Please bear in mind this is a concentrated portfolio of equities, hence high risk.
In Charlie’s own words: “When you invest, I tell you what I am doing with your money and why. I offer my unvarnished views on companies and markets. I share investment ideas and principles that you can apply to the rest of your portfolio. No other investment service offers this.”
NEW: Wealth Club Portfolio Service – ISA, SIPP or general investment account
The Wealth Club Portfolio Service provides investors with well-diversified, institutional-grade portfolios (the type a private bank or wealth manager might build for you), but without the hefty price tag.
We are not aware of any similar service that can match it.
Each portfolio is a diverse mix of 30–45 actively managed and low-cost index funds as well as investment trusts. They give you exposure to equities and bonds from around the world, but also infrastructure and other private assets.
You can choose from five portfolios – Conservative, Balanced, Growth, Adventurous Growth and Income – based on the level of risk you are comfortable with. We do the rest: make the investment decisions and regularly rebalance the portfolio.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.