Lowes UK Defined Strategy Fund: Tax

Being able to assess the future tax liability on forthcoming investment returns can be a somewhat vague task. One of the beauties of investing in structured products is that the payout at maturity is pre-defined, as are the possible maturity dates. It is this definitive feature that has made them such a popular asset for investors and advisors. It does however mean that investors will automatically receive their money back on these pre-defined maturity dates or at the end of the term, whether this suits their tax planning needs or not.

The Lowes UK Defined Strategy Fund, (the “Fund”), retains the benefits that structured products bring, whilst mitigating their illiquid nature and set terms, which in turn can help provide more efficient tax planning. The Fund offers a structure which provides daily pricing liquidity and access to a portfolio of structured products. So how does this help in terms of tax planning?

Any gains produced from the Lowes UK Defined Strategy Fund when held by a UK investor outside of a tax shelter, are subject to Capital Gains Tax rules. Every UK resident currently has an annual tax exemption of £12,300 (2022/2023 tax year). Those who invest in the Fund are able to maximise their use of this allowance by making partial sales of their holdings in different tax years, selling down in a year where they have full access to their personal Annual Exempt Allowance or selling their holding in a year when receiving lower income (e.g. retirement) and so taking them into a lower tax bracket. Any gains that fall outside of the annual exemption will be subject to tax at the prevailing rate, which is currently 10% for basic rate taxpayers and 20% for higher rate taxpayers (2019/2020 tax year).

Finally, it is only when investors come to sell all or part of the Fund that tax will be applicable as any changes to the underlying portfolio do not give rise to a Capital Gains Tax liability; a benefit that cannot be achieved by an individual investor. Whilst most investors will not entirely replace their individual structured product exposure with the Fund, one of its many uses is for those times when tax planning becomes a more significant priority and a defined set of potential maturity dates is not suitable.

If you would like to know more about the Lowes UK Defined Strategy Fund, please visit the Fund website or call Lowes Investment Management on 0191 281 88 11.

Further Information:

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.

The Fund is suitable for investors who are seeking capital growth over a medium to long term horizon but who are willing to tolerate medium to high risks due to the potentially volatile nature of the investments.

The Lowes UK Defined Strategy Fund is a sub-fund of the Skyline Umbrella Fund ICAV and is regulated by the Central Bank of Ireland. The KIID, Prospectus, and Supplement can be accessed by visiting UKDSF.com/Literature and are only available in English.