Welcome back to our series of exclusive interviews with industry experts. In this series, we speak to key figures in the tax-efficient space to find out their outlook on the new tax year, hear their thoughts on the 2023-24 tax year, and provide their tips for advisers.
This time, we have Nick French, Chief Distribution Officer at Blackfinch Group. Nick predicts a positive year despite the changes that come with a general election.
Q: What effect does the new tax year have on investing in the tax-efficient sector?
“With the start of the new tax year, it’s crucial for investors to be aware of significant changes impacting tax-efficient strategies. For example, the Capital Gains Tax (CGT) annual exemption has been reduced to £3,000 from April 2024, potentially leading to higher tax liabilities for investors selling assets. Proactive portfolio assessment and strategic adjustments, guided by professional advice, are key to ensuring that investment strategies optimally align with the evolving tax framework.
Looking at this one example, Advisers should encourage clients to maximise this annual CGT exemption by considering investments like the Enterprise Investment Scheme (EIS). By reinvesting taxable gains from assets such as property or investments into qualifying EIS projects, investors can defer CGT payments and potentially reclaim taxes already paid, offering a strategic approach to tax planning and wealth preservation.”
Q: Will it be a happy new tax year for tax-efficient investing?
“We are optimistic about the prospects for tax-efficient investing. Despite the potential for political shifts which could influence economic conditions, the fundamental principles that underpin tax-efficient investing remain intact. These foundations provide stability for investors to continue benefiting from schemes designed to promote long term growth, such as venture capital trusts (VCTs), irrespective of the political landscape.
This year presents exciting opportunities for investors to actively engage and explore new avenues that may have been overlooked in the past. With significant changes in the tax landscape, investors cannot afford to be passive and hope that their current portfolio is still fit for purpose.
Moreover, there are compelling opportunities available in the market, such as our revised Blackfinch Adapt IHT Service which will soon incorporate forestry investment with dynamic asset allocation. This innovative approach aligns with our commitment to offering diversified and tax-efficient solutions to investors.
Notably, it has been a record-breaking year for our Blackfinch Spring VCT, highlighting the buoyancy of early stage tech businesses in the UK economy. SMEs, which account for 60% of total employment and 50% of turnover in the UK private sector(1), play a vital role in driving innovation and economic growth. Investing in these sectors not only supports their development but also offers potential for significant returns.”
Q: Are there any lessons to be learnt from 2023-24?
“Over the past year, unexpected and escalating regional conflicts have at times destabilised global markets. These events underline the importance of robust risk mitigation strategies in investment management to maintain stability for investors. Diversification plays a crucial role in this regard, ensuring that portfolios are resilient against market fluctuations.
At Blackfinch, we take pride in our track record of stability and performance. For instance, our Adapt IHT Service has consistently delivered growth without any negative years since its launch over a decade ago. This consistency highlights the effectiveness of our approach in navigating challenging market conditions.
Moreover, the increasing IHT receipts reported by HMRC reflect the growing necessity of IHT-efficient investments in estate planning. As the burden of proof for IHT planning continues to rise, our solutions remain well positioned to address these evolving needs and provide long term value for investors.”
Q: Factoring in the general election, what is your outlook for the year ahead?
“The uncertainty surrounding a general election can lead to market volatility. While a potential change of government is likely to maintain the structure of EIS and VCT schemes to support SME innovation, there could be adjustments in the cap on investment amounts or changes in the tax reliefs offered to align with economic policies aimed at wealth distribution.
Investment managers play a crucial role in navigating these changes and advocating for the best interests of investors. It’s important to collaborate closely with industry bodies and policymakers to ensure that investment strategies align with evolving regulations and market dynamics. This collaboration helps to ensure that investment products continue to serve the needs of investors effectively.”
Q: Lastly, do you have any tips for advisers on how best to take advantage of tax-efficient investments for their clients and why?
“Advisers should highlight that tax-efficient investment products offer more than just tax benefits – they also play a crucial role in diversifying portfolios into alternative asset classes, enhancing overall stability and growth potential.
By incorporating Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS), and other tax-efficient options, advisers can assist clients in navigating the changing tax environment while diversifying their investments across different sectors and asset types. This approach not only optimises tax efficiency but also contributes to a well-rounded investment strategy aimed at mitigating risks and capturing diverse growth opportunities.
Encouraging clients to explore these tax-efficient vehicles within the context of broader portfolio diversification can lead to more resilient and successful investment outcomes for the new financial year.”
Nick brings over 25 years’ experience to Blackfinch, following a 3-year tenure with Marlborough Group as Head of Adviser Solutions and CEO of the Select Platform. He previously spent over 12 years at Russell Investments where he was Managing Director. He has also been involved in Consulting, mergers and acquisitions and had various roles at Zurich and Skandia Life (Old Mutual) throughout his career.