Tax-efficient investments in the UK

UK citizens aged at least 18 years can enjoy tax relief on investments if they open an Individual Savings Account, up to a maximum amount of £20,000 per tax year.

This is an attractive opportunity to get the most out of various investments. For all those who do not have much knowledge about financial markets and investments, there are alternatives which allow you to be constantly followed by an expert in the field in the preparation of an investment portfolio.

How financial consultancy works

The idea is quite straightforward: instead of making choices based on random criteria, one turns to professionals who can advise on which may be the best opportunities to open a Stocks and Shares ISA. An ISA, namely an Individual Savings Account, is a savings account not subject to Income tax and Capital Gains tax; thus, there is a chance to increase the total profit of the investment. In this regard, there are several investment vehicles proposed by brokers and wealth management companies, for example, Moneyfarm offers a solution which may be simple and suitable even for those who don’t have an in-depth knowledge of investments and speculation. As a matter of fact, to open an Individual Savings Account is just required to log into the company wealth management’s website and then to choose one of the accounts among those proposed by the company.

Tax-free savings

As mentioned above, UK citizens have the opportunity to earn interest from their savings without paying tax. In particular, the current cap for tax-free Stocks and Shares ISA allowance is set at £20,000, and the holder of the account can withdraw or reinvest throughout the tax year if he or she has a flexible ISA without affecting the annual allowance. Experts are always on hand to offer advice and tips on how to invest further sums or which are the most interesting forms of investment at the moment. If you wish, it is also possible to merge another ISA account into the main one, so that you have all your capital invested in the same place.

Investment portfolio

Every investor has different and very personal goals. For this reason, it is not possible to determine which are the best mutual funds, titles, or other investment products. As a matter of fact, when one turns to an expert financial advisor, or to a wealth management company, he or she receives personalized advice, tailored to the specific needs and goals the individual investor, and to the budget, of course. Therefore, the investment portfolio is an entirely personal and original instrument, which differs from one investor to another.

Choosing the investment vehicle

What we have just described is the common procedure followed by most wealth management companies. Thus, when choosing the investment product (i.e., investment vehicle), it is important to take into account some criteria. Among these, there is the actual cost of the portfolio management: in fact, there are companies that offer low fees with no hidden costs, thus with no nasty surprises at the end of the tax year. This may be particularly interesting for ISAs holders, as the accounts work in a tax-efficient way, and thus the only cost is the one related to the portfolio management.

ISA’s characteristics 

As already pointed out, the key feature that marks this type of investment is the opportunity to pay no tax on interest and dividends within the limit of the annual allowance. To be more specific, this means that if an investor has several ISAs types, he or she only gets taxation back on that total amount, obtained by adding up the amount of all ISAs types. Thus, there is not a limit on the number of ISAs one can own, but an investor can open one of each type of ISA per tax year, which will enable him or her to obtain a good return and to maintain the value of money despite inflation.