Shelter your returns

With investment markets as grim as they have been - and almost without any relief - we're grateful for any slight advantage which will improve our circumstances, aren't we?

It seems to us that accountancy-linked IFA practices are in a perfect position to develop a robust tax-oriented investment proposition for their clients.

Again, in the present environment of minimal interest rates, the tax position affecting our investments provides a further argument in favour of using (appropriate) forms of equity as a basis for a valid strategy.

Consider dividends.  The effective tax rate is :

• zero if you are a basic-rate taxpayer
• 25% if you are a higher-rate taxpayer

Remember that clients are entitled to transfer shares and other investments to their spouses (including Civil Partnerships, but not including a 'Common Law' relationship).  This opens up significant opportunities for tax-based financial-planners to help clients reorganise their assets in order to, effectively, create 'tax-free' income - and we're ignoring the benefits of the ISA allowance.  Depending upon the amount of investment income, this could save over £14,000 annually!!

Consider also Capital Gains.  OK, in the present market, perhaps this form of return is something of an endangered species, but it does represent a convincing secondary source of investment return when the alternative might be deposits.  For a higher-rate tax-payer, the rate payable on gains which are in excess of the annual exemption is only 18%, whereas the effective tax-rate on interest would be 40%.  And of course, there is the annual tax-free allowance of £9,600 - which could save around £3,800 compared to receiving taxable bank interest.

Tax-planning and accountancy-based IFAs are in the absolutely pre-eminent position to help drive their clients' investment strategies - what are you doing to maximise the benefit from this obvious professional advantage?