11th August 2020

Prudential: Where do you want your client’s (investment) recovery to happen?

When investing for the longer term it’s almost inevitable that you will experience a market downturn at some point and last month I wrote about tax points to remember if your client’s investment have fallen in value. But investment values can go up as well as down and some of the biggest market rises have come off the back of large market falls. 

If markets were to bounce back tomorrow would your client’s money be in the right tax wrapper, or even the right hands to make the most of it?

Here’s a quick look at some of the tax considerations to help you check your clients are in the right place for a  market recovery.

Individual Savings Accounts

Any income or gains within an ISA are free of tax and there’s no further tax on the investor on a personal level.

The ISA subscription limit for the current tax year is £20,000 for an adult or £9,000 for children under age 18. However although there are restrictions on the amount you can subscribe, the growth on your ISA doesn’t count towards the limit.

If you normally bed and ISA your OEICs at tax year end would it be better done now before any potential recovery?

If you want to hold on to your assets then it makes sense to ensure future returns are tax free but if IHT is an issue then do you want this tax free growth rolling up within your estate only to be subjected to 40% IHT on death?

Unless BPR ISAs are appropriate for your client, ISAs are not “tax free” for those with an IHT liability and consideration should be given to encashing and making outright gifts or gifts into trust. One benefit of falling fund values is that the value of a gifted investment will result in a smaller gift being made from an IHT perspective and the future growth will accrue outside your estate when markets recover.

Click here to read about Pensions, OEICs, Onshore Bonds and Offshore bonds.

Investments, Investment Commentary, Tax, Trust & ISA, Pensions