Value of tax incentives on people’s savings and investments grow to a record high of £27.1bn

by | Sep 3, 2022

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Tax incentives granted to people in the UK on their savings and investments hit a record high of £27.1bn in the last year*, shows new research from Bowmore Financial Planning.

The use of tax incentives is key for individuals who want to maximise the value of their savings and investments. Incentives available on savings and investments include tax reliefs on pension contributions, Individual Savings Accounts (ISAs) and Venture Capital Trusts (VCTs).The largest tax incentives gained by individuals last year were £22.5bn in income tax relief on pension contributions and £3.7bn on ISAs.However, Bowmore’s research shows that the growth in money being saved through tax reliefs has been slowing, increasing by only 1% in each of the past two years. The Government has introduced fewer new tax incentives in recent times and many of the existing incentives have been restricted or cut.

Cuts made in recent years include:

  • The Government has progressively reduced the amount that high earners can contribute to pension funds annually. This has resulted in a £400m drop in the value of pension relief claimed in the past year
  • The eligibility criteria for Enterprise Investment Scheme and Venture Capital Trust investments have been restricted, reducing the opportunities to utilise tax relief on these schemes



Ms Gill Millen, Managing Director, explains that investors need to maximise the tax incentives available to them every year, particularly as these incentives can be cut at short notice. The Government is looking to plug the gap in its finances following the pandemic and may see reducing tax breaks as an area where more money can be brought in.Ms Gill Millen says: “Making the most of the tax reliefs available is a very powerful way to make your savings and investments work harder.”“The consistent chipping away at tax reliefs undermines the attractiveness of saving and investing. It risks deterring individuals from saving enough for their retirement, which could have a detrimental long-term impact on their finances.”Ms Gill Millen adds: “Any decision by individuals on where to save or invest should be made with careful consideration. Tax reliefs are a great way to maximise savings, but they should be secondary to an individuals’ overall saving or investment strategy.”

*HMRC year end March 30 2021


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