Personal Investments

The downside of direct holdings in a variety of investments is the investment risk. This of course may be diluted via investment across a broad spread of different assets. However, the administration, from both a tax perspective and that of managing the risk profile of your holding, may become unwieldy. Investment into collective investments such as unit trusts or investment trusts is an alternative to a direct holding. The tax treatment of these investments is generally the same as a direct holding. However, they may be considered to be more attractive investments because they offer a spread of risk and because the trust manager can deal in the underlying assets within the trust without crystallising a tax liability. They also offer this spread without the administrative burden of holding each and every holding directly. 

It must be borne in mind that unit and investment trusts are sector specific and in order to move from an underlying investment of, for example, UK equities to European equities, it is necessary to dispose of one holding and purchase another.  This creates additional costs as well as potentially crystallising a Capital Gains Tax (CGT) liability.

Within these investments there are a wide range of fund options, including gilts, corporate bonds, property and equities, including managed and sector specific funds. 

These can be held directly, with a view to utilising your CGT exemption (£9,600 in 2008/09). Alternatively, the underlying taxation of these can be varied by investing via different investment wrappers such as Individual Savings Accounts (ISAs) and Investment Bonds.