Most of us understand the impact of positive investment returns over the medium term but do we also appreciate the impact on those returns of correct ownership of investments across the family? Appropriate ownership structures built around the optimum use of tax reliefs and allowances can significantly enhance the return after tax. Using the case study below, we illustrate how you can improve the tax efficiency of your investments by using different structures and diversifying ownership.
Mrs Brown, who runs her own business, has £1m that she would like to invest and has no existing investments. We would suggest the following structure to optimise tax efficiency.
This all sounds sensible but let’s look at how the ownership of investment could improve overall tax efficiency even further:
Mr and Mrs Brown might also consider the tax efficiencies available from investing in specialist schemes such as a Venture Capital Trust. These can provide Income Tax relief on the amount of the investment and tax-free dividends, and capital growth.
As with all wealth planning, the objectives and risk tolerance of the individual and their family are paramount and should inform not only the investment but also the ownership and structuring of that investment.
As we experience regular changes to the tax and regulatory landscape, so too our clients’ circumstances and priorities change, and our regular interactions with them enable us to provide timely and relevant advice on how best to structure their investments. For further information on tax efficient investing or for a review of your overall wealth plan, please contact your usual Brown Shipley Adviser.
Rebecca Williams // Client Director
Our Wealth Planning Service can involve investing your capital, which places it at risk. Investment risk means the value of your investments or any income can fluctuate and you may not get back some, or the entire amount invested. We recommend our clients seek professional tax advice to understand their personal liability for investment income or gains. This will depend on personal circumstances and the prevailing tax rules, which are subject to change.
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