There are a range of investment products available offering attractive tax breaks and the potential for superior investment returns. However, they do not necessarily all represent attractive investment opportunities.

Menzies Wealth Management constantly monitors the market to review products and will only recommend those which have passed a strict review process.

There are three mainstream products that we believe fall into this category. These are as follows:

• Individual Savings Acounts
• Venture Capital Trusts
• Enterprise Investment Schemes

Individual Savings Accounts (ISAs)

The maximum contribution that may be paid to an ISA in the 2010/11 tax year is £10,200.  It is anticipated that the maximum contribution limit for ISAs will in future be linked to the Retail Prices Index. There is no maximum or minimum term that an ISA investment may be held for.

ISA investment returns may be paid free of income tax or capital gains tax. Importantly any tax credits attaching to ISA investments cannot be reclaimed.

Up to £10,200 may be invested in stocks, shares or qualifying investment funds. It is also possible to invest up to £5,100 per annum on cash deposit with the balance invested in investments as described immediately above.

The favourable tax treatment of ISAs ceases on death.

Venture Capital Trusts (VCTs)

VCTs are portfolios of unlisted or AIM-listed high growth companies managed by a specialist fund manager. The following tax treatment applies:

• Income tax relief of 30% of the gross investment provided shares are held for 5 years, up to £200,000 per tax year
• All profits after five years are payable free of capital gains tax
• All distributions are free of income tax

Investments in VCTs carry increased investment risk compared to fully quoted larger company shares and are not suitable for all investors.

Enterprise Investment Schemes (EISs)

EIS investment is limited to investment in one company rather than a range of companies.

The following tax treatment applies:

• Income tax relief of 20% of the gross investment provided shares are held for at least three years, subject to a maximum investment of £500,000 per tax year
• All profits after three years are payable free of capital gains tax
• All distributions are free of income tax
• Loss relief – realised losses on EIS shares may be used to offset income tax

In addition, some EISs will be eligible for Business Property Relief (BPR) and thereby will offer 100% relief from Inheritance Tax after two years .