14th March 2016


Both Individual Savings Accounts (ISAs) and pensions provide an opportunity for UK investors to shelter their money from the taxman.  It is something everyone should consider.

Within an ISA you pay no tax on any capital gains or income earned and you do not have to declare your ISA’s existence on your tax return.

With pension savings you immediately receive income tax relief on any personal contributions, and the monies grow free of income tax or capital gains tax.  On encashment you could be liable to some income tax on the proceeds but at least 25% is tax free before you reach 75 years of age.  The new legislation has made pensions an irresistible way of saving and planning with no restrictions on access past the age of 55 and 58.

As an added bonus, pension savings can be seen as an exceptionally efficient tool to avoid inheritance tax.

At present, you can invest up to £15,240 in this tax year and you can choose to invest this in cash, stocks and shares, or a combination of the two.

For the majority of savers pensions contributions are limited only by your earnings or a cap of £40,000. For some people it is up to £190,000, depending upon previous contributions.

From the next tax year, for high earners contributions will be capped at £10,000 per year which means that it is important to take advantage of this tax years limits.

You might already have ideas about the assets in which you want to invest. Perhaps you are considering equities, fixed income, cash or a mix of asset classes. It may be worth considering a collective investment scheme that will provide exposure to a more diverse range of investments.

Since time flies by, you should consider taking action as early as possible. The end of the current tax year is fast approaching and you don’t want to lose this year’s allowances for good. Whatever you choose to do, you should plan ahead in order to make the most of the long-term benefits offered by an ISA or pension.

Of course, you do not have to use the whole allowance but if you can take advantage of it, or if you have investments elsewhere that could be transferred, ISAs and pensions provide a more tax-efficient way to invest.

Contact us at Platinum if you would like to review how you can maximise your allowances and plan to grow more tax efficiently.