Forty-five per cent of retail investors in the UK do not have a good understanding of the taxes they must pay on their investments, new research has found.

A study by Shojin has also revealed that Just two out of five (40%) believe their investment strategy is tax efficient.

The investment platform commissioned an independent survey among 777 UK adults, all of which have investment portfolios worth in excess of £20,000 – which includes all forms of investments but discounts their savings, pensions and property used as a primary residency.

Shojin said its 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 climbed to 53% among investors aged 18 to 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.

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

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