Chancellor lays the ground for Budget tax hikes – what can investors do?

A VCT is in many ways similar to an investment trust. It is a company listed on the London Stock Exchange that raises money and uses it to invest in young, innovative and often privately-owned companies.

When you invest, you could receive:

• Up to 30% income tax relief – save up to £60,000 on your income tax bill when you invest in newly issued VCT shares
• Generous allowance – invest up to £200,000 per tax year
• Tax-free dividends – no need to declare VCT dividends on your tax return and they won’t use up your dividend allowance, which is currently £500
• Tax-free growth – no CGT on gains

Note: VCT dividends are variable and not guaranteed.

The EIS (Enterprise Investment Scheme) incentivises investment in small and usually privately owned or AIM-quoted companies. You can invest directly in individual companies or in an EIS fund, where the fund manager makes the investment decisions.

When you invest, you could receive:

• Up to 30% income tax relief – up to £3,000 saving on a £10,000 investment 
• Carry back – potential to use the income tax relief against a previous year's tax bill
• Very generous allowance – up to £1 million per tax year (or £2 million if at least £1 million is in knowledge-intensive companies)
• Tax-free growth
• Capital gains deferral – defer capital gains from other investments, potentially indefinitely
• Loss relief – offset any future losses against your income
• Inheritance tax relief – potentially pass on your investment free of IHT

The Seed Enterprise Investment Scheme (SEIS) is designed to complement the EIS. SEIS companies are even smaller and younger than EIS ones, hence riskier. Accordingly, SEIS tax reliefs are more generous.

When you invest, you could receive:

• Up to 50% income tax relief – up to £50,000 saving on a £100,000 investment
• Carry back – potential to use the income tax relief against a previous year’s tax bill
• Generous allowance – £200,000 per tax year
• Tax-free growth
• Up to 50% capital gains reinvestment relief – halve the CGT due on gains from elsewhere
• Loss relief – offset any future losses against your income
• Inheritance tax relief – potentially pass on your investment free of IHT

The earlier you use your ISA and pension (SIPP) allowances, the earlier you could start benefiting and have your money working for you.

And investing your ISA or SIPP through the Wealth Club Portfolio Service might be worth considering. 

The service is designed to help more experienced investors grow wealth in the long term without the hassle of selecting your own investments (we do that for you).

You can choose from five portfolios: the type of portfolio a private bank or wealth manager might build for you – but without the hefty price tag. In fact, you could pay around 40% less than you would if you used an adviser, and roughly the same as managing a typical fund portfolio yourself on a DIY platform.

Our discretionary Managed Portfolios are for the long term. They can fall as well as rise in value; returns are not guaranteed. They are not personal advice. If unsure, please seek advice. Pensions cannot be accessed until age 55 (57 from 2028). We do not currently offer pension drawdown.

If you plan to do an ISA this year and are concerned about inheritance tax (IHT), you could consider an AIM IHT ISA.

When you invest, you get the usual ISA benefits of tax-free growth and income. But, in addition, after two years your investment could benefit from some inheritance tax (IHT) relief if you still hold the AIM investments on death. In contrast, conventional ISAs could eventually be subject to IHT of up to 40%. Tax rules can change and benefits depend on circumstances.

If you’re an experienced investor worried about inheritance tax and are happy to take significant investment risk, there are several AIM IHT ISA offers – you can read our reviews and apply online.