Further tax efficient income

Individual Savings Accounts (ISAs)

ISAs are a great way to generate more tax-free investment income.

You can subscribe up to £20,000 into ISAs each year and consolidate old cash ISAs into stocks and shares ISAs.

ISAs generally don’t cost anything other than the underling investment fund costs and any platform costs, and allow you to earn tax free investment income and capital gains.

Gains and dividends versus income

Less than 1% of UK tax payers pay capital gains, and yet the top rate of capital gains tax is 20%, versus 45% on income and 60% on income between £100,000 and £125,000 per year.

Dividend tax rates at 7.5%, 32.5% and 38.1% are also lower than marginal income tax rates.

International or Offshore Investment Bonds

For those who have “maxed out” their ISAs and are using their annual capital gains tax allowances an international investment bond is an uncontroversial way of deferring income tax and receiving an untaxed annual income.

They are no longer expensive contracts and are widely used by UK tax residents. They are less efficient at dealing with capital gains than investment income.

Important Notes
Tax issues will depend on everyone’s individual circumstances. Future tax rates, allowances, tax types and the tax treatment of savings and pension accounts will be subject to change. Tax planning needs to be a regular ongoing process.
Non UK resident tax payers will need to get advice on the taxes payable in their country of residence.

Next: The right assets in the right accounts →

Tideway Investment Group comprises the following entities: Tideway Investment Partners LLP; Tideway Wealth Management Limited and Tideway Asset Management Limited. Tideway Asset Management Limited and Tideway Wealth Management Limited are appointed representatives of Tideway Investment Partners LLP, which is authorised and regulated by the Financial Conduct Authority. FCA number: 496214.

Tideway Wealth Management Ltd
107 Leadenhall Street
London EC3A 4AF

+44 (0)20 3143 6100
info@tidewayinvestment.co.uk

© Tideway Investment Group 2019

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