What is a Personal Investment Company?

  • Written By : Kasra Dash
  • Time : 5 minutes

If you are looking to find out more information about a personal investment company then continue reading our article we go into full detail on what a PIC is and how you can set one up.

What’s a Personal Investment Company (PIC)?

A Personal Investment company, or (PIC), is a private company that is most commonly used for long-term financials. A PIC holds cash deposits, investment funds, share portfolios and rental properties. PICs are a viable alternative for investors who usually carry out trading activities personally.

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How can a PIC be Used?

Business Planning

You can use a PIC for business planning and saving money while doing so. A lot of business owners struggle to withdraw large sums of money from a private trading company without being heavily taxed on it and being able to trade close to the net asset value.

If you’re taking money out of your business and it’s not for personal expenses, using a PIC instead can be a better alternative for long-term financial investments as a long-term investment vehicle.

Retirement Planning

You can use PICs to plan retirement effectively. As private investment companies are for long-term investing, you can use them for retirement dividends by lending money to the PIC for it to pay you back tax-free.

Family Wealth

If you want to pass on wealth to the next generation, then holding shares within a PIC could be the best option.

University Costs

Using a PIC to fund university costs is another way of making savvy investment choices. Adults going to university can become shareholders and, as a result, get dividend income from a PIC. Depending on the level of this income, they can also benefit from not paying tax on the dividends.

Inheritance Tax Planning

You can save up to 40% in taxes by using a PIC that allows for your investments to grow and be paid as part of retirement living costs.

Risk Management

The main business of a PIC is to make investments more tax-efficiently. PICs can be used for risk management, spreading the risk of wealthy individuals who invest regularly.

What are the Tax Benefits?

PICs have several tax benefits, meaning they are a great investment portfolio option. Namely, the fact any dividend income is non-taxable most of the time, and any gains are taxed at 19% as it stands.

Gains and income earned from investing can be paid straight into a pension plan for tax purposes, and any losses incurred from rental income can be balanced against any other income. Finally, Management fees and fees relating to the portfolio can be accounted for and subtracted from tax.

When is it best to use Personal Investment Companies?

There are several key advantages to using a PIC:

  1. PICs can keep any profits for investing instead of them being taken out by shareholders and taxed personally.
  2. PICs can invest in many different investments, including shares, cash, property and investment funds.
  3. Company tax is currently at a rate of 19%, while income from dividends is tax-free most of the time. It’s worth being aware that capital gains tax is 19% as well, and any costs related to managing investments can be deducted for tax purposes.
  4. Profits generated from investing can sometimes be paid into a pension fund and serve as tax relief for the company itself.
  5. PIC firms can be lent profits from the trading company for investment purposes, meaning they can be used to fund retirement.
  6. As an individual, you can lend funds to a PIC for investment purposes. The funds can be paid back to the person tax-free. It’s worth noting that the intention must be for the PIC to make a long-term investment so that when the individual has reached retirement, the PIC can then send dividends at a basic tax rate of 8.75%.
  7. Shares from a PIC can fund university costs for the owner. They can receive dividends on shares to avoid paying university tuition costs using personal income that is taxed at higher rates.
  8. You can save 40% on inheritance tax by planning and allowing for growth outside of an estate.

Can an individual be an investment company?

Yes, as an individual, you are eligible to create a personal investment company as a private company you can use to hold your invested stocks or secure bonds and stocks. Any money you choose to invest will be put in the company’s bank account.

Frequently Asked Questions

Why TaxBite

TaxBite chartered accountants are experts in personal investment companies and unit investment trusts. If you’re curious about formulating your own personal investment company and don’t know where to start, our accountants are available to help you today.

Whether you need assistance with mutual funds, private equity, investment growth, liquid assets, or even open-end funds, our advisors can help shed some light on how formulating a personal investment company can be beneficial to you.

We also provide our clients with financial plans that cater to their growing needs, unique requirements and current portfolio. While most investment managers have a standard approach to investing for their clients and their retrospective investment companies, we pride ourselves on a more detailed approach.

If you’re looking to invest, start an investment business, secure your future assets, or are interested in building an investor’s portfolio, our team would be more than happy to advise and help you manage your assets or wealth. Whatever your circumstances, deciding to secure your assets or just to begin investing can be a great way to become more tax-efficient.

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Click the link below to talk to us and get professional advice about private investment companies. With one of our chartered accountants, investors can start their personal investment company today. If you’re looking for tax-efficient ways to fund retirement, university, or property investment, then a personal investment company might be the best way forward.

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