Savings & Investments

While an investment portfolio may contain a small element of cash for liquidity purposes, it is crucial to maintain cash savings outside of the portfolio to cover any unexpected costs. While this cash can be expected to generate a nominal return in the form of interest, historically, cash has only kept pace with inflation and is therefore at risk of losing value in real terms over time. It is therefore important to consider how much to keep in cash for security and how much to deploy into a longer-term investment strategy to seek capital growth in real terms, or income generation.

We make use of cashflow forecasting software and reporting to form part of our discussions, taking into account income, outgoings, assets and liabilities over time alongside life events. This helps with informed decision-making around the allocation of capital to savings and investments, and seeks to optimise both elements.

In simple terms, ISAs (Individual Savings Accounts) and their Junior equivalents JISAs (Junior ISAs) are tax shelters for you and your children’s savings and investments. Any income or capital gain earned within ISAs and JISAs is tax-free. You can save or invest a set amount each tax year.

Private investment accounts, also known as general investment accounts, do not provide a tax-free or tax relievable shelter for income or capital gains tax. They can, however, be tax–efficient – providing an opportunity to use capital gains tax and dividend tax allowances that may not otherwise be utilised elsewhere.

Private investment accounts can be held personally, jointly, or, if suitable, by a company.

Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) are high-risk investments and are not suitable for most investors. They were introduced by the UK Government to help small companies raise finance by offering a range of tax reliefs to investors who purchase shares in those companies. Income tax relief is available, and in some cases, so too is the option for deferral of capital gains tax, tax-free dividends, and Inheritance tax mitigation through business property relief (BPR).