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Wow’s Top 3 Tips for Saving Tax

October 1 2010 by Sarah Eble


From 6 April 2011, every taxpayer has an annual ISA allowance of £10,680 in total – not just the £5,340 which you can invest in cash. You cannot carry this allowance forward to future years, so you need to use your allowance by 5th April each tax year or it will be gone forever!

ISAs should be a no-brainer for almost everyone who has investments as they are by far the most advantageous product
from a tax & flexibility perspective.

Income and gains are predominantly tax-free inside an ISA and our advice would often be to make the most of these tax-privileged investments before looking at anything else.

One word of caution – investment ISAs can provide great potential for long-term growth but there are risks, so please get advice before committing to any investment.


OK, so they may have had bad press in the past, but times have changed and you can now pretty much invest in whatever you like within a pensions wrapper (with the exception of residential property). If you are a higher rate tax payer, pensions can be the most tax-efficient way of investing for the long term, as well as providing some immediate tax benefits.

Example: A 40% taxpayer makes an £8,000 personal pension contribution. This automatically gets increased to £10,000 by basic rate tax relief being added by the pension provider at source. Furthermore, by putting this contribution on their tax return, the higher rate taxpayer will reduce their tax bill by a further £2,000 – or receive a £2,000 refund in the form of a cheque. The total £10,000 investment has only cost them £6,000, with £4,000 of tax being claimed back. It will also grow free of income tax & capital gains tax. Where else could you get that kind of return on your initial investment?

You should beware that there are now some complex rules in place governing the amount that people can now save into pensions so please take advice on the suitability of this tax planning strategy as it might not be right for everyone.

Venture Capital Trusts and Enterprise Investment Schemes

VCT’s and EIS’s are often riskier investments and they most certainly are not right for everyone, so you need to think carefully before investing in any of these schemes. However from a tax perspective, they are certainly a very attractive option for the right person.

Examples: One of the main benefits is the tax relief you get on the initial investments. VCT’s (Venture Capital Trusts) attract tax relief on the initial investment at 30%. This means if you invest £10,000, you will get £3,000 back in tax relief immediately. You will need to hold the investment for 5 years and the maximum investment is £200,000 per person per tax year.

EIS (Enterprise Investment Schemes) now attract tax relief on the initial investment at 30% (from 6 April 2011). This means if you invest £10,000, you will reduce your tax bill by £3,000 immediately. You will need to hold the investment for 3 years and the maximum investment is now £1,000,000 per person per tax year (from 2011/12).

Please take advice before investing in either of these schemes as they are only suitable for certain types of investor.

If you would like to find out what the best options are for you, call Wow on 0845 201 1582 or email us  to book your free initial tax-planning consultation.

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