The Arkenstone Blog

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Clean up your tax strategy (before Rishi does it for you)

Rishi Sunak’s Autumn Budget was one of the most anticipated for some time; that was until last week when he took the unsurprising decision to postpone until early 2021.

This short reprieve affords people some vital extra time to get their financial plans in order ahead of the inevitable: tax increases (government Covid support packages won’t pay for themselves you know).

Most of our clients are generally happy to pay their fair share of tax but like anything in life, there’s a limit. And this limit will be tested soon enough – Income tax, National Insurance, Capital Gains Tax (CGT), pension allowances, Corporation Tax (CT) and Inheritance Tax (IHT) are all likely to be up for grabs in the near future.

Why is this important?

Many of you will be investing for your future or perhaps drawing income from your assets right now. It should go without saying (but I’ll say it anyway) – the more tax that gets deducted from your investment returns or income, the less you walk away in your pocket.

Or to put it another way – if your investments aren’t working hard enough, it means you might have to.

I’d never advise anyone to take any action based on what we think might happen (the world is far too difficult to predict at the moment), so the task at hand is to simply try to optimise your position based on the options available to you right now.

Get your wrappers right

Wrappers are the financial products that hold your investments – the most well-known being ISAs and pensions, which have specific tax advantages attached to them (along with many limits and rules).

Getting your investments into the right wrappers is the single most effective way of legitimately avoiding, minimising or deferring taxes.

It’s simple but not necessarily easy.

Income Tax and CGT

As this is a blog about tax, your eyelids should be starting to feel a bit heavy right about now but it’s worth spending two minutes to briefly consider some tax-saving options.

The most common type of unwrapped investment product is a Unit Trust fund (also referred to as a General Account or OEIC). Income and capital gains generated by unwrapped funds are fully taxable at your personal rate, so if we do see tax rises, your returns from these investments will be taxed more heavily.

If you have any sizeable amounts in Unit Trusts/General Investment Accounts, now is the time to consider:

Realising capital gains in these funds up to your yearly CGT exemption of £12,300 every tax year (and reinvesting the proceeds). Long story short, over time this will help to reduce or avoid potential a CGT bill when you sell the investments in future.

-As part of the above exercise, you could move some of the fund proceeds into wrappers like ISAs and pensions. The benefit of placing your investments in these wrappers is that any capital gains or income they produce are tax-free (more on pensions below).

-A less well-known but highly effective tax wrapper is an Investment Bond. This offers further opportunity to minimise or at least defer tax (particularly high/additional rate tax-payers) and offers a good port of call once ISA/pension allowances have been fully utilised.

-For more adventurous investors, Venture Capital Trusts (EIS) and Enterprise Investment Schemes (EIS) offer some very generous income and capital gains tax breaks. These are high risk investments which are generally not suitable for the of majority investors (you can lose your capital).


Whether it’s a lump sum or monthly contributions, every personal payment into a pension or SIPP receives a government top-up (tax relief) at your personal rate of tax. For example, if you’re a basic rate tax payer wanting to make a £10,000 contribution to your pension, this effectively only costs you £8,000 as the government makes up the difference. The rate of tax relief for higher and additional rate tax payers is even more generous.

Tax relief is one of the main selling points of pensions but there is talk this will move to a simple flat rate or be further capped in some way (as has been the case in the past). Either way, the amount of relief you’ll be able to claim could well reduce in future.

If you’re a business owner, then making company contributions to a pension is a virtual no-brainer provided you have sufficient cash flow. As well as being an efficient way of moving profits out of the business, company pension contributions are treated as a business expense thereby reducing your Corporation Tax bill.

Whatever your position, where it’s suitable you should look to maximise pension contributions in the current tax year. In certain circumstances, you can even bring forward unused allowances from previous tax years, which will attract even more tax relief.

A pension is a long-term investment not normally accessible until 55 (currently). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Inheritance Tax

A major overhaul of IHT legislation has been on the cards for some time, but it’s hard to say whether the government would implement big changes now, or opt for a simple increase in IHT rates/reduction in allowances.

If you’re keen to make a dent in the IHT liability on your estate now, I’d avoid the temptation of putting all your eggs into one particular solution, as any major legislative change might retrospectively undo some good work.

Estate planning is best approached in a balanced way over time. Using a steady and suitable combination of the following solutions is still the most effective way to maximise your beneficiary’s eventual inheritance:

-Make Lifetime Gifts to your beneficiaries.

-Make Gifts into Trust for beneficiaries or charitable causes.

-Money held in Pension/SIPP Funds is still an IHT-efficient way of passing money down.

-Specialist Life Insurance policies – a simple and effective solution that doesn’t involve the (sometimes difficult) of making large gifts.

-Investing in a portfolio of AIM shares, which are IHT-exempt.


Investment property has been subject to increasing levels of tax over the last few years – additional stamp duty, higher CGT rates and limits on interest rate relief.

If you have one or two investment properties, there’s not a great deal you can do to hide from tax. Where you have a portfolio of properties, there may be some tax advantage in moving these within a company or some form of trust. This is a complex area so I’d very much recommend employing the help of a good accountant and solicitor.


If you’re going it alone, there are one or two simple steps you can take yourself here but you’ll need an eye for detail particularly when it comes to things like calculating CGT, working out your pension allowances and understanding the finer points of IHT.

Where you work with an Independent Financial Adviser (IFA), configuring your investments and wrappers to your maximum tax advantage should be part of the service they provide. It should also be said that certain solutions like Investment Bonds are typically only available through a financial advisor.

Whether you manage this yourself or need to find a financial adviser to oversee this all for you, some action is better than no action. Don’t leave it too late…and don’t make life too easy for Rishi.

If you’d like to discuss your circumstances with me or perhaps want to be put in touch with an accountant or solicitor from our trusted London network, contact me at or on 020 8371 0982.



Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate tax advice.

Investment properties are not regulated by The Financial Conduct Authority.