UK investors who have used their ISA and pension allowances are turning to buy-to-let property and tax-advantaged private company investments such as Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS), according to new analysis from wealth and asset management group, Rathbones.
A nationally representative survey of 3,092 UK adults with investable assets of up to £2.5 million reveals that investment behaviour changes markedly once tax-efficient savings options are exhausted, with wealthier investors far more likely to embrace complexity and risk in pursuit of higher returns.
Investment in buy-to-let property rises sharply with wealth, from just 4% among investors with £25,000–£250,000 of investable assets to 35% among those with more than £2.5m. Allocations to VCTs and EIS follow a similar trajectory, increasing from 2% at the lower end of the wealth scale to 25% among the wealthiest respondents.
Isabella Galliers-Pratt, senior investment director at Rathbones, says: “Once they’ve used ISA and pension allowances, the next question we hear from clients is: where does my next pound go?
"As wealth increases, investors are more willing and able to take on higher levels of risk. Greater financial resilience gives them the confidence to explore opportunities beyond mainstream wrappers."
“The right route depends on time horizon, risk tolerance and personal tax circumstances. It’s important to balance the understandable desire to shelter investments from tax with the risks involved. Paying tax isn’t a bad thing – it typically means your investments have performed well.”
Beyond property and tax-advantaged schemes, the research shows a clear rise in the use of higher-risk alternative assets as wealth increases. Adoption of peer-to-peer lending, cryptocurrencies and unquoted shares climbs from 5% among investors with £25,000–£250,000, to 14% for those with £500,000–£1m, and 25% among individuals with more than £2.5m.
Use of other taxable investment accounts, such as those holding shares, bonds and funds, also rises steadily, from 31% in the lowest wealth bracket to more than half (54%) of investors with £250,000 to £500,000, and over two-thirds (69%) of those with investable assets of between £500,000 and £1m.
Despite growing interest in higher-risk assets, cash remains a cornerstone of UK portfolios. Some 94% of investors hold savings accounts or Premium Bonds, rising to between 95% and 97% even among the wealthiest respondents.
Isabella shares her top tips if you’ve used your ISA and pension allowances:
1: Revisit your pension if you haven’t fully used it
If you’ve only maximised your ISA, it’s worth taking another look at your pension. The annual allowance is £60,000, and the three-year carry-forward rule allows unused allowances from previous tax years to be topped up in one go. For higher earners, the associated tax relief can be particularly valuable.
2: Use a General Investment Account (GIA) - but manage tax carefully
GIAs offer flexibility, but income and gains are taxable. Making full use of annual capital gains and dividend allowances, and carefully timing realised gains, can help keep tax bills under control.
3: Couples should use both partners’ allowances
Couples can effectively double their ISA, dividend and CGT allowances. Transfers between spouses are typically tax-free, making this a simple but often overlooked planning opportunity.
4: Assess VCT and EIS risks objectively
VCTs and EIS continue to attract wealthier investors seeking tax advantaged exposure to UK growth companies. However, proposed changes - including a potential reduction in income tax relief from 30% to 20% - could affect their appeal. Risk, time horizon and complexity vary significantly, so suitability should drive decisions.
5: Don’t assume property is a low-risk option
While buy-to-let remains popular, its appeal has weakened. Our recent analysis finds that house prices have barely kept pace with inflation since 2016, while tax, regulatory changes and higher borrowing costs have eroded returns. Many buy-to-let investments are now less attractive on a risk-adjusted basis, particularly where leverage is involved.
6: Be cautious with alternative assets
Cryptocurrencies, peer‑to‑peer lending and unquoted shares can be more unpredictable and may be less easy to access or sell than more traditional investments.
7: Seek professional advice
With potential changes to tax reliefs and wider shifts in tax thresholds, professional guidance can help investors make better-timed and more tax-efficient decisions.
