Check whether you can contribute more to your pension
If you’ve already used your ISA allowance, it’s worth taking another look at your pension. Many people don’t make full use of the annual pension allowance, currently £60,000. You may be able to contribute more than you think through pension carry forward, which lets you use any unused allowance from the past three tax years.
For higher earners, the tax relief associated with additional pension contributions can be especially valuable. It can reduce the overall cost of saving and improve the long‑term growth potential of your pension pot. A pound saved from tax on your savings today could be a pound of long-term compounding for your pension pot.
Pension planning becomes more complex where taxable income exceeds £200,000, as the tapered annual allowance may apply and reduce the amount of pension contributions eligible for tax relief. So it’s often helpful to review your options with a financial planner.
Use a general investment account – but manage tax carefully
A general investment account (GIA) is the next logical step once your ISA allowance is used. GIAs offer full flexibility: no limits on how much you can invest and no restrictions on when you can add or withdraw funds.
However, GIAs don’t come with automatic tax advantages. Any income or gains you generate may be subject to capital gains tax (CGT). This makes it important to make full use of:
- Your annual CGT allowance
- Your dividend allowance
- Careful timing of realised gains, which can help manage tax over several years
A well-managed GIA can work smoothly alongside your existing ISA and savings to support long‑term growth in your wealth.
If you’re investing as a couple, make use of both partners’ allowances
Couples can make significant tax efficiencies by planning together. You can typically transfer assets between spouses or civil partners without triggering capital gains tax, which makes it possible to:
- Ensure both partners’ ISA allowances are fully used
- Double CGT and dividend allowances
- Hold investments in the name of the partner with the lower marginal tax rate
It’s a simple step, but it’s frequently overlooked – and it can make a meaningful difference across a lifetime of investing.
Consider investing in early-stage UK companies via VCTs and EIS, but first understand the risks
Venture Capital Trusts (VCTs) and Enterprise Investment Scheme (EIS) offer attractive tax incentives for investing in early‑stage UK companies. They remain popular with wealthier and more experienced investors, particularly those seeking diversification beyond public markets.
However, these investments are higher risk. Returns can be volatile, and capital may be tied up for a number of years and you may not be able to access it. Proposed government changes – including a potential reduction in income tax relief for VCTs from 30% to 20% – may also influence their future appeal.
If you’re considering VCTs or EIS, suitability is key. They should only form part of a well‑diversified plan and should align with your investment time horizon and appetite for risk.
Don’t assume property is a low‑risk path
Buy-to-let property remains a familiar option for many investors, but its traditional appeal has weakened. Higher borrowing costs, stricter regulation and shifting tax rules have all reduced net returns.
Recent analysis by Rathbones shows that UK house prices have barely kept pace with inflation since 2016. For investors who rely on borrowing, the risk‑adjusted return on property is often less attractive today than in previous decades.
Property can still play a role in a diversified portfolio, but it’s important to view it objectively – and consider whether alternatives may offer better long‑term reliability.
Be cautious with alternative assets
Cryptocurrencies, peer‑to‑peer lending and shares in private companies can be more unpredictable and may be less easy to access or sell than more traditional investments. They’re best used as a complement to – not a replacement for – a well‑constructed core portfolio. For many investors, a small allocation can be appropriate, but concentration can introduce unnecessary risk. It’s important to note these are high-risk investments and you could get back less than what you invested.
Consider the benefits of professional advice
As tax thresholds evolve and policy changes emerge, timing can have a real impact on your long‑term plan. Professional advice can help you work out:
- The best order in which to use allowances
- Whether pension carry forward is available to you
- How to structure investments across ISAs, pensions and GIAs
- Whether VCT or EIS opportunities are suitable
- How best to invest as a couple
- The right level of risk for your circumstances
A well‑designed financial plan helps ensure every decision supports your long‑term objectives. If you’re ready to get your money working harder for you, speak to your usual Rathbones contact or get in touch by filling out our enquiry form below. We’re here to help.
