Diversifying a portfolio
Tax planning strategies to help your clients build a more diverse portfolio while making use of available tax reliefs.
Helping clients who want to broaden their investment portfolio
Experienced investors may be interested in diversifying their portfolio by making a medium- to long-term investment that also has tax benefits.
Venture Capital Trusts (VCTs) and Enterprise Investment Scheme (EIS) investments back early-stage companies, which can bring something different to a client’s portfolio. Investors can claim certain tax reliefs which act as an incentive to take on the risk of investing in smaller companies. Read more about the risks.
Let’s look more closely at planning ideas for clients who want to diversify their portfolios.
Planning ideas for clients
Additional rate taxpayers
Clients who earn a large salary can often make significant contributions to their ISAs and pensions and still have money left to invest.
With a high annual income tax bill and a large existing tax-efficient portfolio, these clients could benefit from other ways to invest tax-efficiently, while diversifying their portfolio.
Clients who’ve built up large ISAs and have an inheritance tax liability can be reluctant to sell down their ISA investments for estate planning.
Clients can hold certain shares in an ISA that qualify for inheritance tax relief. They could move some or all their ISAs into an inheritance tax-efficient portfolio.
Looking for high growth
Clients with a broad investment portfolio and high annual income may want to invest in high growth opportunities.
Clients can make a tax-efficient investment that targets high growth by investing in smaller companies. Investors can claim valuable tax reliefs in return for the risk they take by investing.
Risks to keep in mind
Capital is at risk
The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
Tax relief can’t be guaranteed
Tax treatment depends on individual circumstances and tax rules could change in the future. Tax reliefs depend on the VCT and portfolio companies maintaining their qualifying status.
The investment may be volatile and difficult to sell
VCT shares and the shares of smaller unquoted companies, could fall or rise in value more than other shares listed on the London Stock Exchange’s main market. They may also be harder to sell.
Got a client in mind? We can help
Speak to a member of our team to discuss tax-efficient options for clients who want to plan for retirement.
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Duration: 1hour 48mins