A new survey of more than 750 UK-based retail investors has found:
- 45% of investors do not have a good understanding of how their investments are taxed
- Just 40% say their investment strategy is tax-efficient
- But 37% of investors believe tax efficiency will play a bigger role in their investment strategies amid rising inflation and the economic slowdown
Almost half of retail investors in the UK do not have a good understanding of the taxes they must pay on their investments, new research from Shojin has revealed.
The FCA-regulated investment platform commissioned an independent survey among 777 UK adults, all of which have investment portfolios worth in excess of £20,000 – this includes all forms of investments but discounts their savings, pensions and property used as a primary residency.
It found that 45% lack knowledge of the taxes they must pay on their investments. Just two out of five (40%) believe their investment strategy is tax efficient.
Shojin’s study uncovered a knowledge gap surrounding tax-efficient investing vehicles, with 35% of investors finding it challenging to incorporate these into their investment strategies and minimise the tax burden on their portfolios. The figure rose to 53% among investors aged 18-34.
Despite the lack of familiarity remaining a key barrier, only a third (34%) of investors have used the support of a financial adviser to ensure their investments are tax-efficient.
Looking ahead, 37% of respondents believe tax efficiency will play a bigger role in their investment strategies amidst rising inflation and economic slowdown. This sentiment was stronger among investors aged 18-34, with 53% more inclined to consider tax-efficient investments.
“Taxation on investments is dominating the headlines. And our timely research has uncovered that many investors are operating without sufficient knowledge of how their investments – and the profits they may generate – are taxed," said Jatin Ondhia, CEO of Shojin.
"In turn, the concept of tax-efficient investing is alien to a significant proportion of retail investors. As investors continue to battle with double-digit inflation, tax efficiency must stay firmly on their radars. Setting clear investment objectives and gaining a good understanding of the investment vehicles that can help mitigate the burden of excess tax can go a long way in maximising potential returns on investments.
Education is key, as is the support of advisers and investment providers. The better-informed investors are about the tax implications of certain investments and profits they could generate, the more likely their strategies will achieve the desired goals.”
Download the full report here >
About the research
The market research was carried out between 13th and 17th January 2023 among 2,000 UK adults via an online survey by independent market research agency Opinium, which is a member of the Market Research Society (MRS) Company Partner Service whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The data sample of 2,000 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole. Within this sample, 777 respondents had investment portfolios worth in excess of £20,000 – this includes all assets from bonds and currencies to commodities and stocks and shares but excludes any property that is used as their primary residency.