New year, new regime

The tax year just ended is the third and last in which I had substantial PAYE earnings to worry about.  So I’ve used the same three tax-saving measures as in the last two years, including my biggest ever venture capital investment.  I seem to be one day late for my annual review, so here goes.

I also need to consider better measures of performance.  As portfolios mature, so naïve measures of current value vs money paid in become increasingly meaningless.  But that’s beyond the scope of anything I want to publish here.  So how am I faring?

The ISA is the most conservatively invested, and is cumulatively showing +26%, against 24% last year.  Net of new money invested, that’s a modest 5% actual rise over the year (tax-free), so I guess it’s treading water.  Not complaining too loudly, since my priority there has been to preserve value and save tax.

The SIPP is up either 126% or 36%, depending on whether or not we include the tax breaks in the calculation.  That’s a moderate advance on last year (112%/27%), and better when you factor in the fact that most of the new money was put in at the end of the year and so is showing no gains beyond the tax break.  It’s now reached a level where, if I have a house by then, I can expect to be quite a lot richer as a pensioner than I have in my working life.  Even factoring in the demographically-inevitable loss of pensioner tax breaks and perks!  But it’s still worth building the fund, because the tax-free lump sum is my most likely route to paying for a house (or paying off a mortgage), and if I’m still paying rent it wipes out the pension and more!

Finally, the Venture Capital portfolio.  On paper it’s a capital gain of just over 27%, though due to liquidity issues I wouldn’t expect to be able to realise the whole of that paper gain.  More important is the rising dividend stream: over £1100, plus ex-divs worth another £300+.  That’s more than double last year’s income, and I expect another significant improvement this year as more investments mature (though the chances of all the funds contributing are remote).  Most encouragingly, the government has improved VCT rules in this year’s budget (along with even bigger EIS improvements, that I suspect will lead to EIS schemes being offered to retail investors alongside VCT).

As before, the element of ‘green’ in my portfolio is showing mixed results.  The ‘dark green’s continue poor, though losses have been much smaller than before.  The ‘light green’ portion continues to show excellent returns.  In terms of ‘dark green’, the government may already have pulled the rug out from under my latest substantial investment, by slashing the FITs scheme for investors and turning it into (almost) just another homeowner perk (hey, if I were rich enough to own a home, I’d’ve spent that money on my own solar panels – I only invested it in a fund because I’m too poor for that).  I’m no great fan of FITs (charging a more realistic and rising price for non-renewable energy would be a much better incentive), but I’m not happy about the government moving the goalposts retrospectively with regard to already-committed investments.

What of this tax year?  Well, I’m back to being my own boss, and I’ve no idea whether I’ll get any significant income.  If I do, I can once again take advantage of small-company tax management, so I should have much less need of tax-saving investments regardless.  Unless I end up in another PAYE job.

Posted on April 6, 2011, in investment, tax, uk. Bookmark the permalink. Leave a comment.

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