Tax Efficient Investment Planning for (UK) Business Owners

Simon Baldwin, a leading authority in Tax Efficient
Investment Planning for business owners and a
Certified Financial Planner, whose advice is
guaranteed by FTSE 100 Company. In this
Webinar Simon will talk to you about Tax Efficient
Investment Planning..
There is a link at the end of this deck to the
associated blog and webinar recording.

TA X E F F I C I E N T I N V E S T M E N T P L A N N I N G

CLICK TO EDIT MASTER TITLE
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W E L C O M E
Simon Baldwin
High House Wealth Management Ltd
Associate Partner of St. James’s Place Wealth Management
The Partner / Partner Practice represents only St. James’s Place Wealth
Management plc (which is authorised and regulated by the Financial Conduct
Authority) for the purpose
of advising solely on the Group’s wealth management products and services,
more details of which are set out on the Group’s website at
www.sjp.co.uk/products.

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I N T R O D U C T I O N T O S T. J A M E S ’ S P L A C E
• A leading UK wealth management organisation founded
in 1991
• A FTSE 100 company with a market capitalisation of
c.£6.34bn
• £83 billion client funds under management as at 30th
June2017
• 2378 Partner Practices of the St. James’s Place
Partnership with total number of advisers of 3415 as at
31st December 2016

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R O L E O F A N A D V I S E R

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TA X I N G T I M E S

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TA X R E L I E F S - U S E T H E M O R L O S E T H E M

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Where do I put my ISA? ISA?

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PERSONAL SAVINGS ALLOWANCE
• April 2016’s introduction of the new Personal Savings
Allowance abolishes tax on savings for 95% of savers. (1)
• Basic rate tax payer would have to put £62,500 into the
best-buy easy-access savings account before paying any
tax on the interest. (2)
What does this mean for the Cash ISA?
1://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414026/S
avings_factographic_final.pdf
2 savingschampion.co.uk, 17 July 2015, BM Savings 1.6% gross
The levels and bases of taxation and reliefs from taxation can change at any time. The
value of any tax relief depends on individual circumstances.

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TAX EFFICIENT SAVINGS & INVESTMENTS
• ISA
– Cash
– Stocks & Shares
• JISA
• HISA
• LISA
Seek professional Advice
The value of an investment with St. James's Place may fall as well as rise. You may get back less
than the amount invested. An investment in a Stocks and Shares ISA will not provide the same
security of capital associated with a Cash ISA. The favourable tax treatment given to ISAs may
not be maintained in the future as they are subject to changes in legislation.
Please note HISA & LISA are not available via St. James’s Place.

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I N V E S T I N G F O R C H I L D R E N – J U N I O R I S A
• Under 18 years old
• Maximum £4,128 p.a.
• Gains free of Income and Capital Gains Tax
• No control over 18
• Parent/guardian must apply but
ANYONE can contribute
• Child Trust Funds can now be transferred to
JISAs
The value of an ISA with St. James’s Place will be directly linked to the performance of the
funds selected and may fall as well as rise. You may get back less than you invested.
The favourable tax treatment of ISAs may be subject to changes in legislation in the future

STYLEThe value of an investment with St. James's Place will be directly linked to the performance of the
funds you select and the value can therefore go down as well as up. You may get back less than
you invested. The levels and bases of taxation, and reliefs from taxation, can change at any time
and are dependent on individual circumstances.
All VCTs and EISs must invest in unquoted UK smaller companies and such companies, by their nature, involve a
higher degree of risk than investment in larger companies. As such there is a risk that any of the investments may
not perform as hoped and in some circumstances may fail completely. Also, due to the nature of underlying assets,
VCTs and EISs are fairly illiquid and such investors must be aware they may have difficulty, or be unable to realise
T H E ‘ F O U R P I L L A R S ’ O F TA X E F F I C I E N T
I N V E S T I N G
ISA PENSION VCT EIS
No tax
relief
Income tax
relief
Income tax
relief
Income tax
relief
Tax-free Tax-free Tax-freeTaxable

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Saving for a pension is hard, but
retiring without a pension is a lot
harder.

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14.2
18.6
24.1
27.0
18.0
21.09
26.7
29.5
0
5
10
15
20
25
30
35
1982 2013 2037 2062
Males
Females
UK Life expectancy for 65 year olds
Source: ONS December 2015
FA C T O R I N T O Y O U R P L A N S L O N G E V I T Y

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L O N G E V I T Y
*Source: ONS December
2015

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• Two-thirds of UK population think their retirement
planning is inadequate*
• The average pension pot will last just seven years based
on anticipated retirement income requirement*
• 41% of people are worried they will outlive their savings**
• 68% of people’s investments is held in cash**
• People spend longer each year planning their holiday
than their retirement**
• People who use professional advice have two and a half
times the retirement savings of those who have not**
FACING UP TO THE FUTURE
Source: *HSBC, The Future of Retirement 2013. ** BlackRock, Investor Pulse Survey, 2013.

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A N N U A L A L L O WA N C E
£50,000 £40,000
£40,000
-
£10,000
£255,000
The levels and bases of taxation and reliefs from taxation can change at any time and
are dependent on individual circumstances
2010-11
2011-14 2014-15 2016-17

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L I F E T I M E A L L O WA N C E
£1.5
MILLION
£1.25
MILLION £1
MILLION
£1.8
MILLION
2012
2010
2016
2014
The levels and bases of taxation, and reliefs from taxation, can change at any
time. The value of any tax relief depends on individual circumstances

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EXISTING PENSION
Pension fund of £300,000
40 years old
Wants to retire at 65
Assume 5% growth per annum
What would the pension fund be worth?
£1,015,906
Critical to seek advice on retirement
planningThese figures are only examples and are not guaranteed - they are not minimum or maximum
amounts. What you will get back depends on how your investment grows and on the tax
treatment of the investment. You could get back more or less than this.
The value of a pension may fall as well as rise. You may get back less than the amount

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W H Y S H O U L D I I N V E S T I N T O A P E N S I O N
• Tax Relief on Contributions
• Tax Efficient Investment Growth & Income
• 25%Tax Free Cash at Retirement
• Flexible options for tax efficient income
• Inheritance Tax Exempt
• Tax Efficient options for beneficiaries
The levels and bases of taxation and reliefs from taxation can change at any time.
The value of any tax relief depends on individual circumstances.
The value of an investment with St. James's Place may fall as well as rise. You may get back less
than the amount invested.

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P R A C T I C A L E X A M P L E O F P E R S O N A L P E N S I O N
D E AT H B E N E F I T S
• Q1. If a 70 year old dies while in drawdown pension, can their 80 year old friend
Marge, who is the named beneficiary, carry on taking income tax free?
• Yes, as the individual died before age 75, the benefits can be paid tax-free
irrespective of being crystallised or uncrystallised monies
• Q2. If Marge subsequently dies while in receipt of the income, could any
remaining funds be passed again? If so how would they be taxed?
• They would be passed to any named beneficiary, or it will be decided by the
scheme trustees. As Marge was over 75 any beneficiary would receive income
at their marginal rate, or as a lump sum taxed at 45% (marginal rate from
2017/18)
• Q3. Marge’s son Bart was passed the drawdown fund. Bart does not need the
money and has decided to leave it to his daughter and has not taken any
income. What happens on death?
• If Bart dies before 75 the funds could pass to his daughter tax-free as either a
lump sum or as an income. If he dies after 75, the lump sum and income would
be taxed.

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• Q4. What about IHT?
• Where the scheme administrator retains discretion over who will receive
benefits then those benefits are not subject to IHT.
Based on current legislation. The level & bases of taxation, and reliefs from taxation can
change at any time. The value of any tax relief depends on individual circumstances
P R A C T I C A L E X A M P L E O F P E R S O N A L P E N S I O N
D E AT H B E N E F I T S
.

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C H I L D R E N ’ S P E N S I O N
• Up to £3,600 per year contribution, although tax relief means
your contribution is £2,880 net
• Other adults can contribute once it is set up
• No access until age 55
• The value of an investment with St. James’s Place may fall as well as rise. You may
get back less than the amount invested.
• The levels and bases of taxation and reliefs from taxation can change at any time.
The value of any tax relief depends on individual circumstances.

STYLEThe value of an investment with St. James's Place will be directly linked to the performance of the
funds you select and the value can therefore go down as well as up. You may get back less than
you invested. The levels and bases of taxation, and reliefs from taxation, can change at any time
and are dependent on individual circumstances.
All VCTs and EISs must invest in unquoted UK smaller companies and such companies, by their nature, involve a
not perform as hoped and in some circumstances may fail completely. Also, due to the nature of underlying assets,
VCTs and EISs are fairly illiquid and such investors must be aware they may have difficulty, or be unable to realise
their shares at levels close to that which reflect the value of the underlying assets. Therefore this type of
T H E ‘ F O U R P I L L A R S ’ O F TA X E F F I C I E N T
I N V E S T I N G
ISA PENSION VCT EIS
No tax
relief
Income tax
relief
Income tax
relief
Income tax
relief
Tax-free Tax-free Tax-freeTaxable

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VENTURE CAPITAL TRUSTS AND
ENTERPRISE INVESTMENT SCHEMES
INCOME TAX RELIEF
MAXIMUM
INVESTMENT
MINIMUM TERM
DIVIDENDS
GROWTH
CGT DEFERRAL
IHT EXEMPTION (BPR)
30%
£1m (plus £1m carry
back)
3 YEARS
TAXED
TAX EXEMPT
YES – NO MAXIMUM
AFTER 2 YEARS
EIS
LOSS RELIEF YES
All EISs and VCTs must invest in unquoted UK smaller companies and such companies, by their nature, involve a
not perform as hoped and in some circumstances may fail completely. Also, due to the nature of underlying
assets, EISs and VCTs are fairly illiquid and such investors must be aware they may have difficulty, or be unable
to realise their shares at levels close to that which reflect the value of the underlying assets. Therefore this type of
30%
£200k
5 YEARS
TAX FREE
TAX EXEMPT
NO
NO
VCT
NO

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• *The favourable tax treatment given to EISs is subject to change in legislation and depends
upon individual circumstances. All EISs must invest in unquoted UK smaller companies and
such companies by their very nature, involve a higher degree of risk than investment in larger
companies. As such there is a risk that any o the investments may not perform as hoped and in
some circumstances may fail completely. Also due to the nature of underlying assets, EIS are
fairly illiquid and such investors must beware they may have difficulty, or be unable to realise
their shares at levels close to that which reflect the value of the underlying assets. Therefore this
type of investment should not be considered unless you are willing to accept a higher level of

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ENTERPRISE INVESTMENT SCHEMES
*The favourable tax treatment given to EISs is subject to change in legislation and will depend
upon individual circumstances. All EISs must invest in unquoted UK smaller companies and such
companies by their very nature, involve a higher degree of risk than investment in larger
companies. As such there is a risk that any o the investments may not perform as hoped and in
some circumstances may fail completely. Also due to the nature of underlying assets, EIS are
fairly illiquid and such investors must beware they may have difficulty, or be unable to realise their
shares at levels close to that which reflect the value of the underlying assets. Therefore this type
of investment should not be considered unless you are willing to accept a higher level of risk

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CAPITAL GAINS TAX DEFERRAL
Possible Solution: By making an investment into an EIS the £28,000 is received back from HMRC
and the capital gains liability is deferred until it comes back into charge. They can also benefit up to
£30,000 income tax relief in 2017/18, assuming he has had a liability of at least this amount.
The solutions provided would not be suitable for all investors and the information provided does not constitute
advice.
EISs generally invest in small UK companies, as such there is a risk that any of these may not
perform as originally hoped and in some cases, may fail completely. These types of investments are
therefore only suitable for those willing to take a high level of risk with their capital. The favourable
tax relief given to these investments are subject to changes in legislation and will depend upon
individual circumstances. EIS’s must be held for at least three years to maintain the tax relief
Example: A 60-year old landlord made a capital gain of £100,000 in the
2015/16 tax year.
They have therefore already paid a CGT bill of £28,000 in
January 2017
£28,000£350,000 £100,000
Sold
property
in 2015/16
Capital
Gain
Paid
Capital
Gains Tax*
£100.000
Invest in EIS
2016/17
£28,000
CGT Credit
Possible
Capital
Loss?
Capital
Gain
Deferred for
the life of
EISFuture CGT
rate could
be different*Assumes that the
client’s CGT Annual
Exemption has
already been used.

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P R O F I T E X T R A C T I O N
• Company Director currently
receiving income of £50,000
per year (40% tax payer)
• Additional profit in company
of £50,000 that he would like
to extract
• Requires a tax efficient
method of extraction

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P R O F I T E X T R A C T I O N
£42,000 EIS
£12,600 Income
Tax Relief
£50,100 Net
£50,000 Dividend
Paid
£12,500 Additional
Tax Liability
£37,500 Net
Company Profits
All EISs must invest in unquoted UK smaller companies and such companies, by their nature,
involve a higher degree of risk than investment in larger companies. As such there is a risk that any
of the investments may not perform as hoped and in some circumstances may fail completely. Also,
due to the nature of underlying assets, EISs are fairly illiquid and such investors must be aware
they may have difficulty, or be unable to realise their shares at levels close to that which reflect the
value of the underlying assets. Therefore this type of investment should not be considered unless
you are willing to accept a higher level of risk. The levels and bases of taxation and reliefs from
Assumes client is a 40%
taxpayer for illustrative
purposes only

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V C T R E C Y C L I N G F O R O N G O I N G TA X R E L I E F
*Please note the exact investment period may be longer than 5 years. For illustrative purposes only.
The favourable tax relief given to these investments are subject to changes in legislation. The
underlying investments of VCTs and EISs are usually held in very small UK companies. As such,
there is a risk that any of these investments may not perform as hoped and in some circumstances
may fail completely. They are therefore only suitable for those willing to take a high level of risk. The

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Tax Efficient Investment Planning for (UK) Business Owners

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