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Tax Efficient Long Term Cash Investments

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Tax Efficient Long Term Cash Investments

Not many people are aware of a couple of government schemes aimed at helping enterprise and the local community.

1. Social Investment Tax Relief (SITR)
Introduced in 2014, and expanded in 2017, SITR encourages individuals to invest in social enterprises by offering 30% tax relief on investments.
An example of this in action is a local sustainable supermarket who is currently raising £450,000. In addition to the tax relief the business is offering an interest of 5% pa for the fixed 7 year term of the offer. The loan is however unsecured and the venture speculative you don’t get these reliefs without risk!

2. Community Investment Tax Relief (CITR)
CITR is intended to stimulate private investment in disadvantaged communities by providing a tax incentive to individuals and companies who invest.

The tax relief scheme is available to both individuals and companies (subject to certain conditions) and is worth up to 25% of the value of the investment spread over 5 years, starting in the year the investment is made.

If therefore you lent £10,000 your tax code would increase by £500 that is a reduction in tax for a basic rate tax payer of £100 or a higher rate tax payer £200 or more.

With interest rates being so low these returns are very attractive however do remember the loan is unsecured and therefore at risk should the provider or investment fail.

3. The Innovative Finance ISA (IF ISA)
An Innovative Finance ISA (IFISA) allows you to make peer-to-peer (P2P) lending investments within a tax-free wrapper. This means that any interest earned within this wrapper will not be taxed and will not count towards your Personal Savings Allowance.

Peer to Peer lending can be high risk and the rates achieved reflect this. However, for those prepared to accept the possibility of loss, gross rates of return in excess of 5% p.a. can be achieved. This compares with 0.5% to 2% from the more traditional cash ISA providers.

We are now entering the last 8 weeks of the tax year; if you need help with maximising the use of your tax allowances, do get in touch.


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