Enterprise Investment Schemes (EISs)

Income tax relief is obtainable at up to 20% in respect of amounts of up to £150,000 a year subscribed for new ordinary shares in certain unquoted trading companies, provided the shares are held for at least three years. In addition, capital gains tax deferral relief is available on such investments at up to 40%. There is no limit on the amount of gain that may be deferred.

Gains on the disposal of shares from an EIS are exempt from capital gains tax after three years, although the original deferred gain will then be chargeable. If the shares are disposed of at a loss, the loss is relievable against either income or capital gains.

Venture Capital Trusts (VCTs)

Individuals investing up to £100,000 a year in VCTs will be exempt from tax on resulting dividends, and on capital gains when they dispose of shares. Subscribers to new ordinary shares in VCTs will, in addition, be entitled to income tax relief at up to 20% on up to £100,000 in any tax year, provided the shares are held for at least three years. Capital gains tax deferral relief is available on such investments, for gains of £100,000 or the amount invested if less, at up to 40%.

Friendly Society savings policies

Although the extent to which investments may be channelled into Friendly Society tax exempt funds is fairly limited, they nevertheless provide a modest level of tax efficient investment.

Individual Savings Accounts (ISAs)

Take a look at the table for more details about the maximum annual subscription. Young people of 16-17 years old can invest up to £3,000 in a cash ISA.

All income earned on investments within an ISA is exempt from income tax. In addition, the 10% tax credit on UK dividends is repayable up to April 2004. Gains made on ISA investments are exempt from capital gains tax

(article date 03/2003)