Balancing financial structures to reach your goals

Financial structures must be perfectly balanced to meet your needs, writes Wealth Planner, Jonathan Brownlow


Jonathan Brownlow

Jonathan Brownlow

Wealth Planning Director

Getting the right balance of financial structures will help you reach your goals, whether you want an income, are building your retirement savings or planning the long-term future of your family.

In our experience, a single investment ‘wrapper’ or vehicle is unlikely to provide a complete solution, and therefore you may find that a combination of structures is needed to ensure that money is available when it is required, in a cost-effective and tax-efficient way.

It is, of course, important that the various income tax and capital gains tax allowances have been used. Then you should decide how to hold investments to meet your requirements, for example to improve tax efficiency or to maintain access to income or capital while starting to plan for future generations.

A single investment ‘wrapper’ or vehicle is unlikely to provide a complete solution

Investment bonds

One option is investment bonds, which are either single premium whole-of-life insurance policies, or single premium fixed-term plans that are issued by most of the mainstream insurance companies.

Cazenove Capital has agreements in place with major providers and can be appointed to manage the bond investments on a discretionary basis, thus aligning the underlying investment strategy to your objectives and risk profile.

Interest and dividends received from investments held in the bond are typically received gross, although withholding tax may be paid on some overseas holdings. If capital gains are made, no tax is paid within the bond. This means that the investments benefit from something called ‘gross roll-up’, helping to improve the longevity of the assets, and investment decisions are not restricted by tax considerations.

Bondholders can withdraw up to 5% of the initial investment each year, for up to 20 years, without an immediate tax liability, and any unused withdrawal allowances accumulate and can be used in later years.

No taxable gains are generated for bondholders until a ‘chargeable event’ occurs. These include the surrender of the whole bond, bond segments, or when a withdrawal is made that exceeds the 5% allowance.

Investment companies

In recent years, corporate structures have become more popular, as they also provide a tax-efficient way for individuals and families to hold, and manage, their investments.

Companies pay corporation tax on income and gains, rather than income tax and capital gains tax. The current rate of corporation tax is 19%, with an intention for this to reduce to 17% by April 2020. These rates are lower than most rates of Income Tax and the highest rate of capital gains tax.

Dividends received by a UK company, from most other companies or funds, will not be subject to further tax, and UK companies still benefit from indexation relief when calculating capital gains. Interest and rental income are subject to corporation tax when received by the company, and it may be more appropriate to hold assets providing this type of return in a different structure.

Taking money out of the company is typically done by either receiving a dividend or redeeming shares, and individuals will pay income tax or capital gains tax in the normal way. The company will be structured so that the directors can control who gets what and when in terms of distributions. 

Which structure is best?

Although the way in which investments are taxed is an important consideration, any investment portfolio should, in the first instance, be structured and aligned to meet the objectives and needs of each individual or family.

We would strongly encourage a review with a wealth planner and portfolio manager to help identify the most suitable way for investments to be held, in particular when the available allowances and reliefs have already been used. 



This article is for information purposes only. Nothing in this article should be deemed to constitute the provision of financial, investment or other professional advice in any way. Statements concerning taxation are based on our understanding of the taxation law in force at the time of publication. The levels and bases of, and reliefs from, taxation may change. You should obtain professional advice on taxation where appropriate before proceeding with any investment. Past performance is not a guide to future performance. The value of investments and the income received from them can fall as well as rise. Investors may not get back the amount invested.


Jonathan Brownlow

Jonathan Brownlow

Wealth Planning Director

Jonathan joined in 2016 and is a Wealth Planning Director, providing advice to clients on pension and tax planning issues. Previously he worked at RBC, HSBC, and a privately owned wealth management firm specialising in advice to financial services professionals. Jonathan has 20 years’ experience, is a Fellow of the Personal Finance Society and a Chartered Financial Planner.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.