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.
Shojin CEO, Jatin Ondhia, said: “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. 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.”