6 Ways Modern Investors Can Be Tax Efficient
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6 Ways Modern Investors Can Be Tax Efficient

Investing is an excellent way to enjoy an additional source of income and yet, Capital Gains Tax is still a very real concern. Let's take a look at six methods which will help you enjoy a tax-efficient status while still maximising your profit margins.

Place Existing Dividends into a Retirement Account

One of the many advantages associated with a retirement account is that its holdings are not often impeded by Capital Gains Tax. Depending upon the type of account that you have, it may be possible to shuffle earnings from existing dividends into this scheme. Of course, speak with a professional in order to determine if you will be subject to any limitations.

6 Ways Modern Investors Can Be Tax Efficient


Tax-Free Individual Savings Accounts

An Individual Savings Account (ISA) enables you to make regular tax-free contributions up until a certain point. There are four types of ISAs currently available:

  • Cash ISAs
  • Stocks and shares ISAs
  • Lifetime ISAs
  • Innovative Finance ISAs

Please note that you can contribute to one of each of these every year. In fact, there are even Junior ISAs available for children under 18 years of age.

Investing in Offshore Assets

Offshore investments are often popular options due to their tax-exempt status. These jurisdictions allow individuals to place money into "havens" that are associated with a lower tax bracket. Foreign domiciles such as Andorra will often enable an investor to earn profits off of an asset that would otherwise be subject to higher taxes within the United Kingdom. However, a word of caution should be mentioned. Transparency can often represent a real issue and it is important to perform the correct amount of due diligence in advance.

Spread Betting

So what is Spread betting? It’s a highly tax-efficient way of speculating on price movements while still gaining access to a wide variety of assets. As the investor never physically owns the asset, he or she is not subject to Capital Gains Tax or stamp duties. Thus, profit margins tend to be much more appreciable.


Create a Balanced Portfolio

One of the most important reasons to establish a well-balanced portfolio involves tax implications. Re-balancing a portfolio can help to adjust for any sudden fluctuations associated with a specific asset or sector. As opposed to selling a holding at a loss (and paying Capital Gains Tax), realigning assets can provide a greater degree of stability over time.

Understand Your Taxation Obligations

One of the most common reasons why an individual or business has failed to adopt a tax-efficient strategy involves nothing more than a lack of knowledge. Enacting incorrect procedures and errors in reporting can both cost a great deal of time and money. This is to say nothing about the substantial penalties that could likewise be levied by the HMRC. In order to prepare for any eventualities, it is prudent to speak with a professional adviser. He or she will be able to provide timely advice so that your money can work for you (as opposed to the other way around).