Using investments and allowances to maximise tax efficiency before 5 April 2026

Tax‑efficient investment options come with very different levels of risk and it’s important to understand where each one sits on the spectrum. From higher‑risk opportunities that offer the potential for greater returns, to lower‑risk choices designed to provide more stability and capital protection, we help you understand both ends of the scale.

Venture capital schemes

These offer generous tax incentives to individuals investing in young, higher risk companies which are not listed on a recognised stock exchange.

Specific conditions must be met to qualify for tax relief under the schemes. These include rules on how long shares must be held for.

The enterprise investment scheme (EIS)

The main tax advantages of the EIS are:

• Income tax relief on the investment at 30% on investments of up to £1 million per year and £2 million for knowledge-intensive companies. This relief can be carried back to the previous tax year
• Capital gains tax (CGT) exemption on gains made when the EIS shares are disposed of
• There is also the possibility of deferring capital gains on the disposal of other assets on the purchase of EIS shares.

Seed enterprise investment scheme (SEIS)

This also provides generous tax relief for individuals investing in new, unquoted, growing companies. Qualifying investors can invest up to £200,000 per tax year in qualifying companies, receiving income tax relief of up to 50% of the sum invested. Some, or all, of any unused relief in one tax year can also be carried back to the preceding tax year if there is unused relief available for that year. There is also favourable CGT treatment.

Venture capital trusts (VCTs)

VCTs complement the EIS and SEIS; but whereas the EIS requires investment directly into the shares of a company, VCTs work via indirect investment through a mediated fund. VCTs are quoted companies required to hold at least 80% of their investments in shares or securities in qualifying unquoted companies.

This is a high level overview designed to give an indication of some of the potential tax advantages accruing. For personalised, in-depth advice, please get in touch.

Individual savings accounts

Individual savings accounts (ISAs) are free of income tax and CGT, and do not impact the availability of the savings or dividend allowances. The tax benefits of ISAs continue to be attractive, especially in view of the reduction in the CGT annual exemption in recent years.

There are four types of ISA:

• Cash ISAs
• Stocks and shares ISAs
• Innovative finance ISAs
• Lifetime ISAs (LISAs)

Investment limits

There is a maximum investment limit each tax year. In 2025/26, this is £20,000. This can be invested in one ISA, or split over multiple accounts. Only one LISA each tax year, however, is permitted. The maximum investment here is £4,000 per year.

Change to cash ISA limit: This move is intended to encourage investment in stocks and shares instead. From 6 April 2027, therefore, the maximum that can be invested in a cash ISA will be £12,000, rather than £20,000, for anyone under the age of 65. The overall maximum will continue to be £20,000, but will in future need to include both cash and stocks and shares products. Those aged 65 and over are not impacted by the change and will still be able to invest up to £20,000 in a cash ISA.

Rules

ISAs: ISAs are available for anyone over 18, resident in the UK. Each spouse has their own yearly subscription limit, so although they cannot hold an ISA jointly, a couple can invest a maximum of £40,000 per tax year between them. Withdrawals can be made from an ISA at any time, without losing the tax benefits.

Junior ISAs: Parents or guardians with parental responsibility can open a Junior ISA for a child under 18 who lives in the UK. Junior ISAs are covered elsewhere in this Guide.

LISAs: LISAs are available to anyone resident in the UK, over 18, and under the age of 40. They are intended to help towards purchase of a first home, or provide for later life. The government provides a 25% top-up towards this, up to a maximum of £1,000 per year. Where money is withdrawn for any other purpose, the top-up is clawed back. An exception is made for those who are terminally ill, with less than 12 months to live.

We can help

The tax treatment of any investment is important, and we work closely with our tax team to help you assess the implications for your wider financial affairs. By combining investment insight with specialist tax advice, we ensure you understand how each option fits within your overall plan. If you’d like to explore this further, please don’t hesitate to get in touch.