Income Tax relief is granted at up to your highest marginal rate, with a maximum Annual Allowance contribution limit of £40,000 and the ability to Carry Forward unused relief from the past three years. The Tapered and Lifetime Allowances also need to be considered.
Individual Savings Accounts (ISA)
ISAs are free from Income and Capital Gains Tax (CGT). The annual allowance is £20,000 and parents and grandparents can continue to invest into Junior ISAs, currently £4,368 per individual.
Individuals between the ages of 18 and 40 can invest £4,000 per annum into a Lifetime ISA. Contributions paid before your 50th birthday will receive a 25% Government bonus, if used towards purchasing your first home or can be retained until you are 60.
Enterprise Investment Schemes (EIS)
EIS attract income tax relief of 30% and unlimited CGT deferral, allowing tax free capital growth, loss relief and potential Inheritance Tax (IHT) exemption after two years.
Seed Enterprise Investment Scheme (SEIS)
A SEIS attracts all EIS tax reliefs, but differs in that income tax relief is 50% and CGT reinvestment relief is up to a maximum investment level of £100,000.
Venture Capital Trusts (VCTs)
VCTs have the same income tax relief as EIS and provide tax free dividends. Neither CGT nor IHT relief is given, while the plan term is five years and maximum investment is capped at £200,000.
Capital Gains Tax (CGT)
The annual exemption is currently £12,000 with transfers between spouses exempt. CGT rates remain at 18% for basic rate tax payers and 28% for higher and additional rate tax payers on residential property sales. All other assets liable to capital gains will incur CGT at the reduced rate of 10% for basic rate tax payers or 20% for higher and additional rate tax payers.
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