Tax planning

Avoid the April rush, speak to us about your tax planning opportunities.

Tax efficiency is an important part of Financial Planning and our expert team can help you to incorporate tax efficient investing within your individual financial plan to ensure you utilise the relevant allowances to benefit you and your family.

As the end of the tax year approaches, there is still time to make the most of the valuable allowances, reliefs and exemptions that can help to reduce your tax bill and ensure your finances remain tax efficient. Some of the allowances maybe lost if you do not utilise them before 5 April.
Higher earners in particular should look at ways to invest in a tax-efficient manner.

The maximum amount an individual can put into an individual savings account for the year 2017/18 has increased to £20,000 per year, and the annual allowance that you can receive tax relief on pension contributions remains at £40,000 (reducing to as low as £10,000 for earnings in excess of £150,000).

There are further opportunities for minimising tax bills available to investors, including the Enterprise Investment Scheme (EIS) which was launched over two decades ago and designed to encourage investment in small UK businesses.

To offset the potential risks of investing in smaller companies, taxpayers are rewarded with tax breaks:

Income tax relief – each year, investors can put up to £1m into EIS qualifying investments and receive tax relief upfront and on exit.

Income tax relief at 30 per cent of the cost of the shares is available to taxpayers when they make their initial investment. This relief can be ‘carried back’ to offset income tax liabilities in the previous year.

In order to qualify for this relief, shares must be held for at least three years.

CGT deferral – defer paying CGT due on any gains made 3 years before any EIS investment and 1 year after. If you still hold the EIS investment on death, the capital gain will not be payable or alternatively the charge will be payable on disposal of the shares.

CGT freedom – Any gains made on the EIS investment will not be liable to CGT if held for 3 years. If the EIS makes a loss on disposal this can be offset against other gains or alternatively further income tax relief may be available.

IHT – EIS investments can also be attractive from an estate planning perspective, as after they have been held for two years, EIS shares qualify for business property relief, meaning they are exempt from inheritance tax. The EIS must be held on death to be exempt.

WHIreland have been managing Discretionary EIS Portfolios for clients since 2011 and in the 2017 Autumn Budget the maximum investment in EIS schemes increased from £1 – £2 million providing investors put money into ‘knowledge intensive’ companies. Further details of this change are currently being finalised.

Inheritance Tax (IHT)

Inheritance Tax is the tax levied on your estate when you die, your estate being made up of property, money and possessions including jewellery, art and antiques. Every individual has a ‘nil rate’ band of £325,000, and upon death if the estate is valued under the nil rate band, no Inheritance Tax will be due. If you are married or in a civil partnership at the time of death, your estate can pass to your spouse free of tax and any unused nil-rate band can also be passed to them. From 6 April 2017, an additional main residence nil-rate band (RNRB) was introduced to use against the deceased’s interest in the value of their home (or the assets representing it) that has at some point been occupied as the family home. This is available when the property is inherited on the death of the owner by a direct descendant of the deceased, for example a child or grandchild on death. Further details of how this works can be found on our website,

There are a number of potential ways to mitigate IHT and these include our Inheritance Tax Portfolio Service that gives you the opportunity to mitigate Inheritance Tax on part of your assets, whilst aiming to protect your capital. We aim to achieve some capital growth and to generate a dividend yield that will at least cover the annual management fees for the portfolio. If you have an estate worth over £325,000 (£650,000 for a married couple or civil partnership), then you could potentially lose 40% of your estate over the threshold when you die. The Inheritance Tax Portfolio Service can mitigate inheritance tax upon death, after only 2 years.

Our specialist IHT investment team, supported by a specialist tax consultancy invest in a personal diversified portfolio of AIM listed shares registered in your name, which qualify for business relief if held for at least two years. You continue to have access to your investment if required, although assets not held for the minimum 2 years at the date of death will not qualify for business relief.

If you are interested in finding out more, please contact your Investment Manager.