So what types of investment vehicles are there?
And how tax efficient are they?
Invest in You!
We’re not talking about the fitness-retreat kind of personal investment here, (great as that might be). We’re talking about investing your money in your own name. The simplest way to own assets is in your own name – this might make borrowing money and leaving money in your will easier, but it may cost you more in tax than you’d like to get that money into your own name in the first place.
Your Family
Many people choose to put wealth into a family member’s name. Transferring assets to your spouse doesn’t trigger any tax bills and means that income can be taxed at a lower rate than it might be in your name. Transferring assets to your children though, can be much trickier. Putting assets in the name of a minorwill notreduce your income tax bill – as income from the asset is treated as income for the parent. When it comes to gifting assets to adult children, a gift of cash is one of the easiest ways. But it becomes a little more complicated if you’re gifting other assets, such as real estate, where you may trigger a Capital Gains liability.
Alimited Company
A limited company is one of the most common ways to run a business. But your limited company can also be used to hold investments. There are advantages and disadvantages of using this option with regards to tax, and you’ll want a good Adviser to help you work out whether the pros outweigh the cons, or vice versa. Those with a trading business often wish to use company funds for investment purposes so that they avoid the tax on taking dividends out – but that could create complications down the line if the business fails or is sold. Instead, you could create a holding company, or sister company and avoid some of these potential issues.
A limited Liability >Partnership(LLP)
In the same vein as a Limited Company, a Limited Liability Partnership is used as means for running a trading business. (Got this far and want to know all the differences between a limited company and an LLP? Read our article for a comparison of the benefits – LINK). As a type of partnership, an LLP requires two or more members. So, when it comes to using this structure for investment, it’s essentially the same as owning assets collectively, with some crucial differences to a standard partnership:
