Having the correct protection strategy in place will enable you to protect your family’s lifestyle if your income suddenly changes due to premature death or illness. But choosing the right options can be difficult without obtaining professional advice to ensure you protect your family from financial hardship.
Individual Savings Accounts (ISAs) are not actual investments; they are tax-efficient wrappers surrounding your fund choice(s). When you make an ISA investment you pay no income or capital gains tax (CGT) on the returns you receive, no matter how much your investment grows or how much you withdraw over the years.
When deciding whether to invest, it is important that any investment vehicle matches your feelings and preferences in relation to investment risk and return. Hence your asset allocation needs to be commensurate with your attitude to risk. Another key question to ask yourself is: “How comfortable would I be facing a short term loss in order to have the opportunity to make long term gains?” If your answer is that you are not prepared to take any risk whatsoever, then investing in the stock market is not for you.
Unit trusts are a collective investment scheme that enables you to invest money with others and participate in a wider range of investments and share the costs and benefits of doing so. They have proved popular over the years because cash is invested in a broad spread of shares, thus reducing the risk of losing money if the market falls.
In order to protect family and loved ones, it is essential to have provisions in place after you’re gone. The easiest way to prevent unnecessary tax payments such as Inheritance Tax (IHT) is to organise your tax affairs by obtaining professional advice and having a valid Will in place to ensure that your legacy does not involve just leaving a large IHT bill for your loved ones.
A trust arrangement can ensure that your wealth is properly managed and distributed after your death, so that it provides for the people who depend on you and is enjoyed by your heirs in the way you intend. There still remain significant planning opportunities, even though changes announced in the 2006 Budget in relation to the Inheritance Tax treatment of trusts will have a bearing on the use of trusts in the future.
If you think you may have an old pension but are not sure of the details, the Pension Tracing Service may be able to help. They will try and match the information you give them to one of the schemes on their database and inform you of the results. If they have made a match they will provide you with the contact address of the scheme(s) and you can get in touch with them to see if you have any pension benefits.
For the appropriate investor looking to achieve capital security, growth or income, there are a number of advantages to investing offshore, particularly with regard to utilising the tax deferral benefits. You can defer paying tax for the lifetime of the investment, so your investment rolls up without tax being deducted, but you still have to pay tax at your highest rate when you cash the investment in. As a result, with careful planning, a variety of savers could put offshore investments to good use.
Enterprise Investment Schemes (EISs) are tax-efficient vehicles set up to encourage investment into small, unquoted trading companies. Following the changes announced in various Budgets, the EIS is the only tax-efficient investment offering a capital gains tax deferral. Capital gains tax on the disposal of other assets can be deferred by reinvesting the proceeds in EIS shares.
Individual Savings Accounts (ISAs)
You pay no personal income tax or capital gains tax on any growth in an ISA, or when you take your money out. If you invest in a Stocks and Shares ISA, any dividends you receive are paid net, with a 10 per cent tax credit. There is no further tax liability.