The gulf between personal and corporate tax rates have made companies attractive for holding personal assets.
Investment wrappers can be used to hold assets which might otherwise be held personally, such as investment portfolios and property, to ensure you retain and grow family wealth. Types of investment wrapper include UK companies, trusts, offshore investment bonds and open ended investment companies. Suitability will depend on longer term aims, objectives and family circumstances. RSM can advise on the potential use of a UK company or trust to hold your assets. The structures you could adopt will have differing tax benefits, as shown below.
Individual: Dividends taxed at up to 37.5% (up to 38.1% from 6 April 2016). Other income taxed at up to effective rate of 60%.
Company: Dividends usually taxed at 0%. Other income taxed at 20%.
Trust: Dividends taxed at up to 37.5% (up to 38.1% from 6 April 2016). Other income taxed at 45%.
Individual: Capital gains tax at up to 28%. Annual exemption available.
Company: Corporation tax at 20%. Indexation allowance available.
Trust: Capital gains tax at 28%. Annual exemption available (up to half the individual's rate).
Individual: Rental losses can only be offset against rental profits.
Company: Rental losses can be offset against rental and other income.
Trust: Rental losses can only be offset against rental profits.
Investment management fees
Individual: Not tax deductible.
Company: Tax deductible.
Trust: Not fully tax deductible.
Individual: Not pensionable income.
Company: Pension contributions can be made by company or employee.
Trust: Not pensionable income.