Mark Devlin: When keeping things tax-free is not tax-efficient

'Tax-free isn’t always tax efficient'

clock • 7 min read

Getting the right combination of ‘tax-free’ investments during the client’s lifetime can deliver fantastic results, but keeping things tax-free may not always deliver the most tax-efficient outcome and, more importantly, the highest net return, explains Mark Devlin...

The term ‘tax-free' is used frequently in financial planning in relation to ISAs, pension commencement lump sum (PCLS), beneficiary's drawdown etc. But it's often a misnomer as there are some taxes that may apply. Does this raise the question, is tax-free always tax-efficient? As an example, at time of writing, I checked a comparison site and looking at an instant access cash ISA for a £10,000 investment the best rate available was 0.6%. Only £60 interest in the first year, but tax-free. The best rate for an instant-access savings account was 0.65%. That's £5 more, but all taxable. Bu...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Tax planning

Safeguarding clients in a world of increasing HMRC activity

Safeguarding clients in a world of increasing HMRC activity

'It is important that financial advisers stay informed and proactive'

Louisa Beciri and Tom Lewis
clock 23 April 2025 • 4 min read
IHT receipts swell to record £8.2bn for 2024/25

IHT receipts swell to record £8.2bn for 2024/25

10% higher than last year, commentators note

Jen Frost
clock 23 April 2025 • 2 min read
HMRC gears up for an increase in criminal investigations

HMRC gears up for an increase in criminal investigations

'Criminal investigations are reserved for the most egregious cases'

John Hood
clock 17 April 2025 • 4 min read