Find the best tax efficient savings and investments..
When you save or invest money, you normally have to pay tax on the interest or income earned, but there are some tax efficient savings and investments that offer a
tax-free return.
Popular tax efficient savings: Individual Savings Accounts (ISA): You can use ISAs to save cash or to invest in stocks and shares. You may put up to £7,200 into an ISA each year, £3,600 of which may be saved in cash.
ISAs are tax efficient savings because you do not pay any tax on the interest or dividends and profits are free of Capital Gains Tax.
Child Trust Funds (CTF): Children born on or after 1 September 2002 and receiving Child Benefit get a £250 voucher from the Government to be used to set up a Child Trust Fund.
The voucher may only be put into a CTF, not any savings account, and then friends and family may contribute to the CTF up to £1,200 per tax year.
CTFs are tax efficient savings as neither you, nor your child has to pay tax on any income or any gains in the account until your child reaches age 18.
Other tax efficient savings:
- National Savings & Investments (NS&I) is backed by the treasury and offers the following tax-free savings and investments: ISAs, Fixed Interest and Index Linked Savings Certificates, Children's Bonds and Premium Binds
- Tax-free interest: Banks and building societies normally take 20% tax off interest before they pay it to you, but if your taxable income is less than your tax allowances you can register to have your interest paid 'gross' (without tax taken off).
- Pensions relief: The Government offers tax relief on pension contributions - you can save as much as you like into any number of pensions and get tax relief on contributions of up to 100 per cent of your earnings each year and when you retire you can take up to 25 per cent of your pension fund as a tax-free lump sum.
See below for leading ISA deals: