View more on these topics

Low-tax spread

I am a director of a leading property company and my current shareholding

in the business is valued at £243,000. I have no other equity investments

of any significance. However, I am concerned at having such a high

proportion of wealth tied up in the fortunes of just one company. Could you

explain to me how I could create a more balanced portfolio without

incurring a substantial capital gains tax liability, while also minimising

my income tax payment.

As a higher-rate taxpayer, you will be faced with a substantial capital

gains tax liability if you dispose of the shares.

Unfortunately, there is no quick-fix solution to your problem but I will

outline the strategy we would propose adopting to help you diversify your

portfolio, while minimising the tax burden.

Joint assets

The first step of our strategy would be to name your wife, who is in a

lower income tax bracket, jointly on the portfolio assets.

This would enable us to make use of your combined income and capital gains

tax allowances for each year.

Equity disposal

In order to gradually diversify the portfolio, each year we would sell

your shares in the company up to the value of your combined capital gains

tax allowances.

Tax avoidance

Owing to the cyclical nature of the business, your company&#39s share price

has a tendency to fluctuate dramatic ally, which would enable us to adopt

the following two-pronged strategy:

During periods when the share price is undervalued, shares would be sold

and repurchased within Isas, using both your annual tax-free Isa

allowances. This strategy would maximise the volume of shares sheltered

within the Isa wrapper.

Any subsequent growth when the value of the shares recovered would be free

of tax.

During periods when the share price is overvalued, shares in the company

would be sold and the proceeds used to diversify both inside and outside



Your combined Isa investments would be managed within a maxi Isa alongside

the main portfolio as part of a single, cohesive investment strategy.

The charts below demonstrate how the above strategy worked in real life

for a client who came to us eight years ago with a similar brief. Our

objective was to achieve both diversification and tax efficiency. This

example has been chosen as it reflects real-life results rather than

hypothesising about future share prices and tax regimes..

Over the period, the portfolio has more than trebled in value to £819,000,

even allowing for several withdrawals during the period. Moreover, almost

half the total value of the portfolio – £317,000 – has been be sheltered

within the tax-free environment of Peps and Isas.

This strategy has left the client with £218,000 invested in shares across

a broad range of companies and sectors, providing a much more balanced

spread of investments.

Of the £601,000 still invested in his own company, £154,000 is now within

Peps and Isas and can therefore be switched without tax penalties if the

manager feels the time is right to do so.

The answer is based on the assumption that further information would be

required and provides only a guide to some of the relevant routes that an

intermediary could cover in advising the client.


Jupiter fund manager quits

Jupiter star fund manager William Littlewood has resigned due to “chronic fatigue.”Littlewood had received much acclaim for his handling of the £1.45bn fund prior to his self-imposed three month sabbatical earlier this year.He will be replaced at the helm of the investment trust by Anthony Nutt, who has managed Jupiter&#39s High Income fund since 1996.The […]

Where IFAs dare

It&#39s a bit daunting being “a lone voice”, as Aifa was described in MoneyMarketing a couple of weeks ago. I ordered a tin hat and started referringto my office as the bunker.Now it appears we may not be quite as alone as was thought. There is aconsensus among industry bodies that polarisation in some form […]

Independent View

The last-minute rush to subscribe for an Isa has come and gone andhopefully we can all breathe a little more easily and plan our workaccordingly.Despite their complexities, Isas have been a success. This has beenfuelled partly by the desire of investors to get into technology funds.But there is no doubt that Isas are complicated. It […]

PIA kicks out three companies

The PIA has announced a new round of expulsions, fines and reprimands.The regulator has terminated the membership of Jeffries & Co of 42Barrhill Road, Kirkintilloch, Glasgow, on the grounds that its soleprincipal is bankrupt.It has expelled The Independent Consultancy Group of Brue Business Park,Church Road, Bason Bridge, Highbridge, Somerset, for failing to comply withtraining and […]

Inheritance Tax, a tax on the wealthy? Urban myth or fact?

By Kim Jarvis, Technical Manager with Canada Life’s ican Technical Services Team. Inheritance tax has been around in some form since 1796. Estate duty dates back to 1894 and over the years this tax has evolved into the inheritance tax (IHT) we know and love today, which was introduced in 1986 as a replacement for […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm