The right time for a PEP talk

Move quickly to make the most of this year's Personal Equity Plan allowances

The tax clock starts ticking on Tax-Exempt Savings Schemes on the day you open the account and ticks on for the next five years oblivious of the intervening tax years, before you can take your interest away tax free, so there is no rush to start a Tessa in the next few days. But Personal Equity Plans (PEPS) and their younger cousins Corporate Bond PEPS are regulated by the tax year.

Anyone over the age of 18 can put up to pounds 6,000 in a general PEP or a general Corporate Bond PEP containing a range of individual shares or bonds, plus pounds 3,000 into a PEP invested in the shares of a single company or the bonds of a single company. The package can be from a PEP provider who is usually a bank, building society, stockbroker, investment trust or unit trust manager. They provide standard packages of eligible shares or units for a PEP (or fixed-interest bonds for a Corporate Bond PEP), and ensure they are placed in a PEP "wrapper" to make sure that as long as they are held the investor will not be liable to income tax on the dividends or capital gains tax on the proceeds.

The tax incentives are attractive to basic rate taxpayers and doubly attractive to higher rate taxpayers and those who make capital gains in excess of their annual allowances. There is no need even to declare the income or the investment on tax forms.

PEPS and their Corporate Bond cousins can be bought at any time of the year and the tax benefits begin immediately. Each year investors can add to their holdings, and 10 years after they were first introduced there is still no sign of this government introducing a ceiling.

But unused PEP allowances cannot be carried forward from one tax year to the next and anyone who fails to invest before April 4 will have lost the opportunity, for 1995-96 at least. Investors can also switch their PEP from one manager to another at this time of year. Many PEP providers are also offering investors the chance to invest this year's and next year's allowances almost simultaneously. So especially at this time of year there is no shortage of advertisements extolling the praises of individual PEPS, especially those based on existing investment or unit trusts which can show an impressive investment track record.

Investors can choose between High Income PEPS, Growth PEPS and Tracker PEPS, which make a virtue of following one of the main stock market indices as closely as possible. They can invest in unit trusts and in investment trust PEPS, provided the managers in turn invest in a majority of shares listed on the UK or EU stock exchanges, and they can invest in Corporate Bond PEPS provided they invest in bonds denominated in sterling and issued by UK based companies.

They can even find a guaranteed income PEP on offer from GAN insurance which offers a guaranteed return of capital, and 4 per cent tax-free income, plus a further 4 per cent if the 100 share index has not fallen between 8 March one year and the next. Providers such as Legal & General and Johnson Fry have also packaged their own bonds to provide a guaranteed income on their Bond PEPS.

Alternatively the investor can approach a stockbroker and choose his own shares for a Self-Select PEP, which the broker will then take care of, buying and selling shares and collecting tax rebates on the dividends in return for fees.

Investors can only have one PEP or Corporate Bond PEP per year and six out of 10 investors make a single annual investment, although small investors will easily find a number of providers who are willing to accept regular monthly contributions to a PEP.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
i100
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
health
News
science
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
News
Chuck Norris pictured in 1996
people
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
News
A voter placing a ballot paper in the box at a polling station
i100
News
people
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Sport
football
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

    £20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

    Ashdown Group: Marketing Executive - 6 month FTC - Central London

    £25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

    Ashdown Group: Junior Project Manager (website, web application) - Agile

    £215 per day: Ashdown Group: Junior Project Manager (website, web application ...

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power