There is a wide range of products and services available to UK investors that allow various tax advantages and benefits, with associated risk and reward relationships.
While most people opt to invest their hard-earned cash in low-risk ventures that are likely to guarantee a return, albeit a small one, others could be attracted by plans that are of a longer-term, higher risk nature if incentivised to do so by 30 per cent tax relief, tax free dividends and inheritance tax relief.
Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) between them offer these benefits in order to encourage investment into smaller, less established companies.
Despite the inherent risk involved with investing in companies of this type, the tax benefits can make this type of investment attractive to certain types of investor.
VCTs and EIS investments are also a good way of supplementing retirement plans. For example, the maximum amount that an individual may hold within a single or in multiple pension plans during their lifetime is currently capped at £1 million. This is a large sum of money for most people, however more and more investors, particularly those who are fortunate enough to be members of final salary based schemes, are finding that this limit is restricting the benefit of making future pension contributions towards their retirement.
VCTs and EIS plans therefore could provide one viable alternative to such investors as they offer similar income tax reliefs.
Of course, VCTs and EIS investments aren’t for everyone. The relatively high-risk nature of these plans must be taken into account and you must always be aware that you could actually get back less money than you initially put in. For this reason, we would always recommend consulting a professional financial adviser who can talk you through the pros and cons and help you decide if this is the right type of investment for you.
At Explore Wealth Management, our team of experienced advisers can help you to make investments with confidence as well as provide professional, honest advice on a range of other financial services, including cash flow forecasting, pension schemes and retirement planning.