Get the most of tax-free investing with M&G Investments

The end of the tax year is a key time to review your tax-free investments to ensure you’re getting the most out of them.  Have you reached your R36,000 limit for the current tax year? Contributions before the end of February count towards your allowance, and you don’t want to miss out. Tax-free investments allow you to invest up to half a million rand in your lifetime, without ever incurring any local taxes on your returns. This is an excellent way to help boost the growth of your savings over time, especially if you use M&G investments’ top-performing tax-free funds. These investments can be done quickly and easily online.

M&G Investments’ tax-free funds

We offer tax-free versions of many of our popular unit trust funds to meet all investor time horizons, risk parameters and return goals; in fact, our tax-free unit trusts draw on the same investment capabilities we apply to all our funds. Our prudent, valuation-based investment philosophy means we are risk-conscious and focused on long-term investing.

Our top-performing tax-free unit trusts include the M&G Balanced Fund, the M&G Dividend Maximiser Fund, the M&G Property Fund and the M&G Global Balanced Feeder Fund. 

 Source: Morningstar, M&G Investments, as of 31 December 2021

Advantages of tax-free unit trusts

In case you didn’t know, all investment returns in tax-free unit trusts attract zero local income tax, dividends tax and/or capital gains tax. Other advantages are that you can switch between tax-free funds, and access your money at any time without incurring any penalties, making this solution a very flexible one for saving. And yet another benefit is that your equity and offshore exposure aren’t restricted in these portfolios. Retirement funds, on the other hand, need to comply with the Regulation 28 limits to these asset classes. This means that you can effectively use tax-free investments to increase the total amount of growth assets within your overall retirement portfolio.

You can try M&G Investments’ Tax-Free Calculator to see how much tax you could save by investing in one of our tax-free unit trusts. 

Beware the limits

The contribution limits of R36,000 per tax year and R500,000 over your lifetime are important to remember,  because if you contribute over these amounts, SARS will tax the excess at 40%. It’s also worth noting that any withdrawals cannot be replaced at a later stage. These limits also apply if you contribute to a tax-free Investment on someone else’s behalf, such as your child. The contributions you make will be deducted from their annual and lifetime contribution limits.

Use it or lose it

If you don’t contribute all or a portion of your R36,000 allowance to your tax-tree investment during a year, you lose that opportunity -- it isn’t possible to contribute R72,000 (or more than R36,000) the following year. Each year you can invest R36,000, until your total contributions reach R500,000 over time. It’s worthwhile taking the allowances and making the most of them every year, since the longer you are invested in the financial markets, the longer the time your savings has to compound. It’s also best to consider them a long-term investment, alongside your retirement savings, in order to maximise your returns.  

The underlying tax-free funds you ultimately select should be carefully chosen to match your risk profile, return requirements and investment time horizon, and complement the rest of your portfolio. It’s not too late to learn more about your options and still make a contribution to meet the 28 February deadline for the 2021/22 tax year. M&G Investments’ streamlined online investment forms can be completed in 10 minutes.

For more information on investing with M&G Investments tax-free, please feel free to contact our Client Services Team on 0860 105 775 or email us at info@mandg.co.za.