'ISAs' have been popular for many years and have been long been used as a means of sheltering capital growth from possible Capital Gains Tax. However, it is now possible to use 'ISAs' to mitigate Income Tax.
 
How is this done?

In summary, it is now possible to invest in Stocks and Shares 'ISAs', which in turn invest in Venture Capital Trust (VCT) shares. It is possible to do this through certain specialists providers.
 
Obviously, individual peoples circumstances are different and this type of arrangement won`t suit everyone. However, the tax benefits are attractive and investing in this way could be considered as appropriate advice for some people, as part of their overall planning.
 
An example may help in explaining and highlighting the attractive tax benefits. Based on someone with an earnings subject to income tax, of £67,500 and an income tax liability of £15,000. They have accumulated a sizeable stocks and shares ISA Portfolio amounting to £300,000. However, due to current financial commitments, they do not any financial resources to make new, additional investments. That said, they are still interested ways they can save on their tax bill. Importantly, they are happy and comfortable to allocate some of their existing Portfolio to be invested on an Adventurous Risk Profile basis and in particular, in UK Smaller Companies. I stress, they are happy and comfortable to invest on this basis.
 
Based on this risk profile and also happy to invest on a medium to longer time horizon (more than 5 years), they can invest in a VCT 'ISA'. In practical terms this translates into investing a portion of his existing 'ISA' Portfolio (say, £50,000) via the 'ISA' Transfer process. This will allow them to claim up to 30% income tax relief, provided they hold onto this new investment for at least five years. This means that up to £15,000 can be claimed in income tax relief. In which case, they will have a nil income tax liability.
 
If you would like to discuss this, please contact your Dentons Wealth Independent Financial Adviser.

This article does not constitute advice and you should always speak your Independent Financial Adviser before making any investment decisions.

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