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  • Why take your wealth abroad when you can create your own tax haven right here in the UK?

Why take your wealth abroad, when you can create your own tax haven right here in the UK?

Why take your wealth abroad, when you can create your own tax haven right here in the UK?

With the recent ‘Panama Papers’ controversy and scrutiny of the Prime Minister’s father’s use of an offshore investment fund, the media spotlight has firmly honed in on the use of so-called offshore ‘tax havens’, Yet you don’t need to park your wealth in offshore centres to mitigate potential tax liabilities. With effective planning you can create your own legitimate tax haven here in the UK without needing to take your wealth abroad.

Whilst UK taxation remains highly complex, it offers numerous Government-backed tax-efficient savings vehicles, tax allowances and preferential tax rates which allow much of the UK population to save tax-free and potentially generate over £33,000 of tax-free income/growth each year, from potentially taxable sources:




Amount in 2016/17

Personal Allowance

Amount of income a person can get before being subject to tax


Starting Rate for Savings

Amount of savings interest allowed tax-free, provided ‘non-savings income’* is less than £5,000

Up to £5,000

Savings Allowance

Amount of interest on savings (after savings starting rate, if applicable), allowed tax-free

£1,000 (Basic-rate taxpayers)

£500 (Higher-rate taxpayers)

£0 (Additional-rate taxpayers)

Dividend Allowance

Amount of dividends, allowed tax-free


Capital Gains Tax Allowance

Amount of gains allowable each year on chargeable assets



Up to £33,100


*Starting rate for savings is withdrawn by £1 for every £1 of ‘non-savings income’ over the personal allowance and is therefore unavailable for those with more than £5,000 of ‘non-savings income’.

Taking the above into account, as an example, an individual in retirement with a State Pension of £8,000 per annum, a private pension worth £3,000 a year, £300,000 in a savings account and £200,000 in a portfolio of shares or funds, could draw income, interest and capital from their portfolio and pay absolutely no tax whatsoever:


Income Source




State Pension


Taxable, but within personal allowance


Personal Pension (annuity)


Taxable, but within personal allowance


Savings Account (2% interest)


£5,000 falls within Starting Rate of tax for savings, £1,000 within Savings Allowance


Dividends (2.5% yield)


Falls within dividend allowance


Capital withdrawals from shares equal to growth on portfolio (5.55% growth)


Falls within Capital Gains Tax Allowance




Tax Free


This is just from the individual’s potentially taxable sources. When you then take into account private pensions from which they may be able to access tax free cash, ISAs which can generate tax-free growth, income and capital withdrawals, tax-free dividends from specialist investments such as Venture Capital Trusts (VCTs) and tax-deferred withdrawals from investment bonds, the possibilities are enormous. What’s more, these are individual allowances; so a couple could achieve even more.

Whilst the above example takes the allowances to the extreme, and many may scoff at the thought of having £500,000 in savings and investments, what is fair to say is that most, if not all of the above allowances, can be used by the majority of individuals in the UK in one way or another, ensuring even those with modest incomes can save tax-free.

Remember, these are allowances provided by the Government, they are an entitlement and a portfolio can be structured to take advantage of these unlike tax sheltering offshore, it’s not avoidance, just good planning.

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

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