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Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

Many people are focused on the returns shown on their investment performance statements. Yet how much are these getting eroded by inflation, fees and – crucially – taxes. Whilst there is not much you can do about the first as an investor, there are strategies available to help you mitigate the third. In this article, our investment team here at Bure Valley Group offers some ideas on how UK investors can invest tax-efficiently as 2021 gets underway.

We hope you find this content helpful. Find out more about our EIS and other investment opportunities by visiting our portfolio page here. To enquire regarding our latest projects and funding, you can reach us via:

+44 160 334 0827

 [email protected]


#1 Maximise your ISA

An individual savings account (ISA) is one of the best ways to save and invest tax-efficiently for a UK resident. In 2020-21, you can open one investment ISA per tax year and also commit up to £20,000 across your ISA accounts. The great benefit of committing capital in this “Tax wrapper” is that all capital gains, interest and dividends are free from tax. 

The power of an ISA portfolio cannot be underestimated. For instance, suppose you make full use of your annual allowance each year over a 10-year period. At the end, you would have put £200,000 in your ISAs – even setting aside any investment growth – with the chance to generate further growth and income from the pot, free from tax. 

You can also withdraw the money at any time – as opposed to a pension, where you must typically wait until the age of 55. However, unlike a pension, your ISA portfolio is not protected from inheritance tax (IHT) upon your death. 



#2 Tax-efficient investments

Of course, many investors have more than £20,000 per year which is available to invest. There are, fortunately, other options which UK investors can consider to maximise tax efficiency. For instance, companies which qualify for “EIS status” (i.e. the Enterprise Investment Scheme) can be particularly compelling for investors who are interested in early-stage businesses, who are prepared to take on more investment risk and access opportunities to generate higher returns. 

Some of the benefits of EIS for investors include 30% tax relief on the value of your investment. For instance, suppose you invest £10,000 into an EIS-qualified company. In real terms, you will have invested £7,000 – since £3,000 can be claimed back via your self assessment. Moreover, if you hold your EIS shares for at least three years, you can sell them without incurring a capital gains tax charge. Shares held for a minimum of two years are also exempt from future IHT.

Another tax-efficient investment vehicle to consider is the VCT – venture capital trust. Similar to EIS, a VCT offers investors various tax incentives to attract them, but with key differences. For instance, a VCT is, itself, a company listed on a stock exchange which investors put their money into to invest in unlisted companies on their behalf. One benefit of investing in VCTs is that you can access 30% Income Tax credit on investments of up to £200,000 per tax year (provided shares are held for five years). There is also no capital gains tax or tax on dividends.


#3 Making full use of allowances

In 2020-21 there are a host of allowances which allow you to generate income and gains from your investments, tax-free. Once you exceed the respective threshold, however, then you need to pay the tax in question and the allowance is lost at the end of the tax year. As such, it makes sense to make full use of these to maximise tax-efficiency. Some notable ones include:

  • Capital gains allowance. At present, you can generate £12,300 in capital gains each tax year before they are taxed. As such, if you are planning to sell some of your investments in the coming years, it might make sense to spread them out across two tax years (if you think the gains will hold and you can afford to wait). 
  • Dividend allowance. The tax-free dividend allowance in the UK is £2,000 per tax year. If you go over this threshold, then Basic Rate taxpayers pay 7.5% on dividends and those on the Higher Rate pay 32.5%. This is where an investment ISA can be very powerful, since dividends earned within this wrapper are free from dividend tax.
  • Personal savings allowance. Each tax year you can generate up to £1,000 in interest (e.g. from cash savings) – after which, the interest is taxed at your rate of Income Tax. Whilst it’s important to have an emergency cash buffer, most investors will be paying a high “opportunity cost” by holding significant capital in cash rather than investing it in other assets which could produce a higher return – whilst benefiting from tax-efficiency (e.g. EIS shares or a VCT).


Conclusion & invitation

Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]