Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

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.

David Smith David Smith
18 April 2016

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*Starting rate for savings is withdrawn by £1 for every £1 of ‘non-savings income’ over the personal allowance and is therefore unavailable for those with more than £5,000 of ‘non-savings income’.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 investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance is not a guide to future performance. This press release is not advice to invest or to use our services.

Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. Please note we do not provide tax advice.

VCTs should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. Past performance is not an indication of future performance. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Owing to the nature of their underlying assets, VCTs are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change and the availability of tax reliefs will depend on individual circumstances. You should only subscribe for new VCT shares on the basis of the relevant prospectus and must carefully consider the risk warnings contained in that prospectus.