Benefits of our Investment tax advice & planning service

In our central investment proposition piece earlier, we mention various tax strategies we put in place to grow clients capital further. One great example of this is some married clients of ours we have just advised on in the early part of 2013, who had £280,000 invested across 2 investment bonds.  Within a bond environment, the provider has to pay corporation tax annually on the growth it derives, so typically 20% of that growth. The unfair part of this is that the client can’t reclaim this tax. After ensuring that no penalties or chargeable gains tax occurred on exit, I redirected these bonds to a different investment allowing me to pick a series of underlying funds with low income yields (meaning most of the growth is treated as ‘capital gain’).  With only 1% p/a or so of the gains set to be treated as income, only this percentage of the overall growth gets taxed at 20%! The remainder of the growth will get rolled up into the investment and when it becomes time to switch funds or draw on the money partially or in whole, the clients will be able to use their capital gains tax free allowances of £11,000 p/a each to flush out any further gains free of tax! A quick monetary analysis of the above scenario looks like this;

  • Bond - £280,000 assuming 5% growth per annum = £14,000 x 20% assumed corporation tax rate = £2,800 tax bill
  • Collective investment - £280,000 assuming  5% growth per annum, but only 1% of this as income  x 20% assumed corporation tax rate = £560 tax bill

The result? A future tax saving of £2,240 p/a to add to the net values of their investment every year.

Of course, everyone's situation is different so a Collective investment will not be suitable for everyone, and your specific needs and circumstances will be assessed firstly.



Financial Resolutions Limited is authorised and regulated by the Financial Conduct Authority. Companies House ref; 06543778.
Our location and registered address is 1a High Street, Bovingdon, Hertfordshire, HP3 0HG