Choosing Investment Based Upon Tax Position
Published / Last Updated on 14/06/2015
Choosing Investment Based Upon Tax Position
This section is designed to help individuals and tax payers, limited companies and charities with simple lists for investments that may suit their tax position.
Your personal tax position and the tax position of the investment plan itself drastically affect the best choice of investment plan.
- Some investments are highly taxed.
- Some investments have low taxes.
- Some investments are only allowed for certain types of people.
- Some investments you can reclaim taxes.
- Some investments you cannot reclaim taxes.
- Some investments can defer taxes.
Non Tax Payers investing money should consider the following investments:
- Bank and Building Society Accounts
- Notice Accounts
- Deposit Bonds
- Individual Savings Accounts (ISAs)
- Friendly Society Plans
- Puchased Life Annuities
- National Savings
- Child Trust Funds and Junior ISAs
- Pensions
- Gilts
- Unit Trusts - not dividend income
- Investment Trusts - not dividend income
- Open Ended Investment Companies OEICs - not dividend income
- Real Estate Investment Investment Trust REIT
Basic Rate Tax Payers investing money should consider the following investments:
- Bank and Building Society Accounts
- Notice Accounts
- Deposit Bonds
- Individual Savings Accounts (ISAs)
- Investment Bonds
- Guaranteed Bonds
- Friendly Society Plans
- Endowments and Life Insurance Savings Plans
- Puchased Life Annuities
- National Savings
- Child Trust Funds & Junior ISAs
- Pensions
- Gilts
- Shares
- Enterprise Investment Schemes EIS
- Venture Capital Trusts VCT
- Unit Trusts
- Investment Trusts
- Open Ended Investment Companies OEICs
- Real Estate Investment Trusts REITs
Higher Rate Tax Payers should consider the following investments:
- Individual Savings Accounts (ISAs)
- Investment Bonds
- Guaranteed Bonds
- Friendly Society Plans
- Endowments and Life Insurance Savings Plans
- Puchased Life Annuities
- National Savings
- Child Trust Funds and Junior ISAs
- Pensions
- Gilts - limit amount invested due to direct taxes
- Shares - limit amount invested due to direct taxes
- Enterprise Investment Schemes EIS
- Venture Capital Trusts VCT
- Unit Trusts - limit amount invested due to direct taxes
- Investment Trusts - limit amount invested due to direct taxes
- Open Ended Investment Companies OEICs - limit amount invested due to direct taxes
- Real Estate Investment Investment Trust REIT - limit amount invested due to direct taxes
Limited Companies investing money should consider the following investments:
- Bank and Building Society Accounts
- Investment Bonds - offshore bonds only
- Pensions
- Gilts
- Shares
- Unit Trusts
- Investment Trusts
- Open Ended Investment Companies OEICs
- Real Estate Investment Trusts REITs
Charities and Trusts investing money should consider the following investments:
- Bank and Building Society Accounts
- Notice Accounts
- Deposit Bonds
- Investment Bonds - Trusts, Offshore - Charities
- Guaranteed Bonds - Trusts, Offshore - Charities
- National Savings - some types of Certificates and Bonds - Trusts
- Gilts
- Shares
- Unit Trusts
- Investment Trusts
- Open Ended Investment Companies OEICs
- Real Estate Investment Trusts REITs
When investing for Trusts and Charities all of the usual decisions that affect investing apply, such as:
- The need for income or capital growth
- What the attitude towards risk is
- What the tax position is
- What the period of investment is
Trustees must take care to comply with current legislation and consider the tax treatment of the Trust for all parties concerned.
Trustee Act 2000
The Trustee Act 2000 came into force on the 1st February 2001 and applies only in England and Wales. The Trustee Investments Act 1961 still applies in Scotland with the old range of approved investments.
The Trustee Act 2000 applies to both new and existing Trusts and sets out duties and powers for Trustees. The most notable change to the old laws was in respect of investments, giving Trustees much wider scope for investing the assets of the Trust.
Trustees now have the power to invest the Trust fund monies anywhere they see fit as if they themselves were entitled to the assets of the Trust. When making investment decisions Trustees must consider how suitable the investment is for the Trust and diversify investments as far as is appropriate.
The Trustee Act 2000 obliges Trustees to review any investments made with Trust money on a regular basis and to obtain proper investment advice, possibly from an Independent Financial Adviser.
Advice: If you are acting for a Charity or a Trust and need help, request advice today.
Trustee Investments Act 1961 - rules before 31 January 2001
Until the 31st January 2001, the Trustee Act 1961 set out stipulations for Trustees and the investment of Trust monies.
These were as follows:
- Narrower Range Investments - investments that did and did not require advice
- Wider Range Investments - where advice may be needed for wider investment powers, the Trust fund must have been split into two from the start. Not more than 75% of the investments could be in wider range with not less than 25% in narrower range investments.