Spring Statement 2019: How investors can profit

There were no bunnies in the chancellor's hat, but here are the ways investors can benefit this spring.

As predicted, Brexit uncertainty torpedoed any chance of good news for the UK's savers and investors in Chancellor Philip Hammond’s Spring Statement.

We hear there's a 'deal dividend' of £26.6 billion, which the chancellor can use to bolster the UK economy if Britain ever leaves the European Union.

That's far more than the £15.4 billion discussed in October, but even he admits this may not be enough if we leave without a deal.

However, despite the lack of bunnies in Hammond's hat, there are still plenty of ways investors can make the most of the current landscape.

Rebecca O’Keeffe, Head of Investment, interactive investor says: "Overall, while there may be some disappointment for investors that the Chancellor didn't come up with any new investment or savings benefits, UK investors have several opportunities to invest tax efficiently and should aim to take advantage of these before the tax year end. 

"They can also hope that by the time the Budget rolls round, the uncertainty that is tying the Chancellor’s hands currently should be removed and that private investors will be able to benefit from any future 'deal dividend'."

• Spring Statement 2019: What to expect from the chancellor

ISAs

According to HMRC ISA statistics, the average adult ISA subscription for 2017/18 was around £6,400* – leaving plenty of headroom left to make sure their investments and cash are tax wrapped. Investors should also note that you don’t need to find new money every year for your ISA. 

O'Keeffe says: “If you already have holdings that are outside an ISA, you can Bed & ISA these – selling them, moving the cash into an ISA wrapper and using it to repurchase holdings – to make them tax efficient for the future.

"However, investors should be aware that selling any existing investment outside of a tax wrapper will create a capital gain or loss – though the annual CGT allowance may well cover this."

Pensions

O'Keeffe says: "March is the best month of the year to work out exactly how much income you have received across the tax year, so that you can optimise how much to put in a pension. Pension contributions affect your net income and it is this 'adjusted net income' that is used to calculate whether or not you are entitled to receive certain allowances.

"If you earn over £100,000 you gradually lose your annual personal allowance and are, in effect, paying tax at a rate of 60% between £100,000 and £123,700. Paying into a pension and reducing your adjusted net income could be highly beneficial as it effectively keeps your salary at a lower level and allows you to claw back some or all of your allowance.

"And don't forget that investing in a pension comes with significant tax benefits itself, even if it doesn't affect any other allowances. Higher rate taxpayers only pay £6,000 net for a £10,000 gross pension investment."

EIS & VCT

For those investors who don't want to pay more into their pension for fear of breaching the annual or lifetime limits, EIS and VCTs offer alternative ways to reduce your tax bill whilst also investing in start-up companies and helping support a segment of the market that doesn't get mainstream investment.  Not for the faint-hearted, they are very high risk, but can be a good way to pay less tax and diversify your portfolio.