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Innovative Investment Opportunities That Also Offer Tax Reliefs And How To Make The Most Of Them
To minimise the risks of investments and maximise returns, potential tax reliefs have often been at the forefront of experienced investors’ minds when they’re choosing their next venture. As we’re looking at high inflations and low-interest rates across the country, now more than ever, it is vital that you consider the right investments and how they can provide you with tax relief to boost your profits.
Each investor has their own style of investing and the level of risk they’re comfortable with, which is why there are many different routes you can take when looking for innovative investment options that also offer tax relief. Here, we cover the top investments you can choose from and how you can make the most of them to generate the best returns on your investments.
Individual Savings Accounts (ISAs)
You will likely have heard of ISAs before, but you may not have realised how beneficial they are to investors looking to make the most of their money through tax relief schemes. This type of savings account was introduced in the UK in 1999 and was a scheme that was designed to encourage people to save and invest their money. Now, many ISAs are designed with families in mind, as they’re an excellent way to invest your savings for the future.
Products you can expect to see on the market for ISAs include cash ISA, lifetime ISA, stocks and shares ISA, and innovative finance ISA. Each ISA product has different parameters for risk and rewards, and the one you choose will depend on your own personal preferences. For instance, the cash ISA is popular with people looking for low-risk savings schemes, whereas the innovative finance ISA is a more high-risk venture that includes a range of assets such as debt-based securities and peer-to-peer loans. However, whichever one you choose to invest in will benefit from a tax (CGT)-free environment that allows your funds to grow over time.
Venture Capital Schemes
For more experienced investors, venture capital schemes are an excellent way to grow your capital and enjoy various tax reliefs. Venture capital schemes are typically designed to provide investment opportunities for individuals to invest their funds in startups or early-stage businesses in order to promote growth across the UK’s enterprises.
Within the venture capital schemes, there are three products you should know more about: Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs).
Enterprise Investment Scheme (EIS): The direct successor to the Business Expansion Scheme, the EIS was introduced in 1994. Its primary goal is to encourage business growth throughout the UK by allowing private investors to invest in early-stage businesses (trading for at least seven years) with generous EIS tax relief options like 30% income tax relief, tax-free gains, and CGT deferral. If you’re interested in investing in EIS schemes, head over to Oxford Capital and learn more about the scheme and its benefits.
Seed Enterprise Investment Scheme (SEIS): A younger version of the EIS, the seed enterprise investment scheme was designed to motivate investors to invest in the youngest strata startups that have been trading for at least two years with no more than 25 employees. However, to offset the added risk of investing in such young businesses, the SEIS has a range of tax incentives that are even more generous than its sister scheme, such as up to 50% income tax relief on earnings, CGT reinvestment relief, CGT disposal relief, and loss relief.
Venture Capital Trusts (VCTs): While the tax reliefs you can get with venture capital trusts are similar to EIS and SEIS, the structure of this investment is slightly different as it focuses on multiple companies and involves a fund manager. A VCT is a listed company that manages a portfolio of other companies, from early-stage to AIM-listed businesses. When investing through a VCT, a fund manager will work with you and invest your funds into the companies that fit your personal preferences and risk levels.
National Savings And Investments (NS&I)
An NS&I is the only bank backed by the HM Treasury and provides a wide range of savings and investment products that you can choose from for a variety of benefits. Some of the products you can expect to see can include:
- Income Bonds.
- Premium Bonds.
- Cash ISA.
- Guaranteed Equity Bonds.
- Direct Saver.
- Investment account.
- Guaranteed Growth Bonds.
- Guaranteed Income Bonds.
- Junior ISAs.
Depending on the product you choose, you may be paid back in interest, stock market returns, inflation-linked returns, or tax-free savings, returns, and prizes. For instance, the premium bonds product not only provides you with tax-free interest but investors are also incentivised with the chance to win monthly tax-free prizes ranging from £25 up to £1 million.
AUTHOR: Isabella Goode
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About the Author Jackie Groundsell
Jackie Groundsell -The Connector, owner of 1230 The Women’s Company (TWC) is also known as the queen of women's business networking meetings and events. As a businesswoman herself for the past 25 + years, she’s been there, done that and got the T-shirt! She’s an approachable recognised business Expert, Mentor, IT Trainer and has e supported thousands of small business owners through her events and lunch-time meetings Jackie is also a weekly Radio presenter, reaching and supporting even further into the business world. ... and would love to hear from you.