Products for Tax Planning

Products for Tax Planning

Pensions offer complete exemption from inheritance tax liability and grow in a tax free environment where contributions attract income tax relief. Therefore, they offer individuals the opportunity to save for retirement, reduce their income tax liability and are valuable assets to pass on to future generations. 

Contributions are allocated to various investments that are available through the designated scheme, most commonly OEICs (Open Ended Investment Companies) or Unit Trusts. Investment returns achieved through the various funds are tax free.

Upon crystallisation up to 25% of the fund can be taken as a tax free pension commencement lump sum with the remaining 75% required to provide an income which is taxed at the individual’s highest marginal rate.

Capital gains tax planning is important especially where gains do not fall within a person’s basic rate income tax band and are therefore taxed at 20%.

Every individual has an annual CGT exemption, which in 2023/24 makes the first £6,000 of gains free of tax. If realised taxable gains are already more than £6,000 it might be possible to dispose of other investments to create a tax loss to set against the excess gains. 

Transfers of assets between spouses/civil partners who are living together can save CGT when the assets are finally sold. If one partner has used up the annual exemption and wants to sell more assets, the assets could first be transferred to the other partner so that his or her annual exemption is used against the gain. Where assets are held jointly, the gain is split equally and both partners can use their annual exemptions.

Some investments are free of both income tax and CGT for example National Savings Certificates, Individual Savings Accounts (ISAs) or Junior ISAs.

The EIS provides the opportunity for investors to claim tax relief for subscribing for new shares in certain relatively small trading companies that are not listed on the Stock Exchange. Income tax relief is given at 30% on sums of up to £1,000,000 invested in a tax year. Gains on EIS investments escape CGT after three years if the investment qualified for income tax relief that has not been withdrawn.

SEISs were setup to encourage entrepreneurship and can provide considerable income tax relief for those willing to fund small, brand new companies that qualify for such investments. Income tax relief of 50% of your investment value up to £100,000 in each tax year can be gained when the money is buying up to 30% of shares in a company that incorporated less than 2 years ago. SEISs are higher risk than EIS as the companies not as established and must have assets worth less than £200,000.

Individuals can obtain income tax relief of 30% by subscribing up to £200,000 for newly issued shares in VCTs.

For some investors, life assurance polices can act as tax shelters. While they hold the investments, the tax suffered on the income and capital within the fund is less than they tax they would have to pay if they held the investments directly themselves. 

They may be able to encash the policies in a year when they have relatively little other taxable income and therefore may pay relatively little or no tax on the profit from the rolled-up income and gains.

Access to the funds in the form of the tax deferred 5% annual withdrawals may also be advantageous, as investors can postpone their tax liability on income and gains within a life assurance bond, but still have access to payments from the fund (i.e. the 5% withdrawal) without paying any tax on it in the year of withdrawal. 

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A&J Wealth Management Ltd


Bigfrith Lane

Cookham Dean



01628 480200

© 2024 A&J WEALTH MANAGEMENT LTD A&J Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. Financial Services Register, no 428590, at Registered in England, Company no: 5105933. Registered Head Office: Sawfords, Bigfrith Lane, Cookham Dean, Maidenhead, Berkshire SL6 9PH

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