UK Investments with Tax Exemptions

Some investments in the United Kingdom are not subject to taxation. These include National Savings and investments, pensions, UK government bonds, individual savings accounts, insurance bonds, venture capital trusts, and enterprise investment schemes.

Some investments which are held by means of the National Savings plan are exempt from taxation including Index-linked Certificates and Premium Bonds. Premium Bonds is a plan that gives out monthly prizes in lieu of interest on individual investments up to £30,000. For pension funds, full tax exemption is granted at the taxpayer’s marginal rate in contributions. In the case of contributions of an employer, it is regarded as an expense, thus, it is not taxed on the employee. All benefits obtained from pension funds, aside from a tax-exempted sum of 25% of the fund, are subject to taxation. For UK government bonds, gains are not subject to taxation for income tax purposes while all income is taxed. An Individual Savings Account (ISA) allows up to £7,200. This comprises a maximum of £3,600 is in the form cash funds, and the balance being allotted for either mutual funds such as trusts or individual self-selected shares. There is no tax deduction although 10% tax withheld on UK surpluses cannot be retrieved.  For insurance bonds, insurance companies give out investment bonds which could either be onshore or offshore. The primary difference between these two is that corporation tax onshore implies that profits are regarded as though the basic tax rate has already been paid. Venture capital trusts are assets or funds in holdings in smaller companies over at least five years. These are exempt from tax and are even eligible for a tax relief of 30% against a taxpayer’s income. Enterprise investment schemes are tax-exempted investments into smaller company shares over three years that can be eligible for a tax relief of 20%.