Efficient Ways to Save Tax

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Efficient Ways to Save Tax

With the financial situation looking uncertain for millions of us right now, savings and investments are starting to become more important. However, simply putting your money away in a common savings account is not the best way to get the most out of your savings and if you are planning on investing to expand your savings, you’re going to want to do so while paying as few taxes as possible. This is the crux of tax-efficient saving and investments.

Maximising your personal savings should be a priority for all long-term investment strategies. While investment schemes such as venture capital trusts and enterprise investment schemes are an option for those with the acumen to make them work, for the rest of us, the best way to make the most of our savings without taking any serious risks is via a tax-free savings account.

Efficient Ways to Save Tax

Individual Savings Account (ISA)

An ISA is perhaps the most tax-efficient saving option available when it comes to savings. A cash ISA is a tax-free saving option that can offer significant interest. With interest rates now at their highest in years, there has arguably never been a better time to take out an ISA.

Individual Savings Account

There are several types of ISA available in the UK. Not that Help to Buy ISAs are no longer an option but if you already have one you can keep adding to it until 2029: –

Cash ISA

A standard ISA where the customer doesn’t have to pay any tax on the interest earned.

Stocks and shares ISA

An account that allows the customer to buy and sell stocks and shares without being taxed. This is very popular with those who want to save but are also happy to take the occasional risk.

Junior ISA

Replacing the child trust funds, these tax-efficient ISAs are designed for those that wish to put money into an account for a young child with no Income Tax or Capital Gains applied on the interest or investment gains. These are available for any child under 18 and you can put up to £9,000 a year into it.

Personal pension

Personal pension

With the uncertainty surrounding the state pension, it’s no wonder that many have decided to start their own personal pensions and, thankfully, the government offers tax relief for those with the wherewithal to save for their old age. When you retire you can often take up to 25% of your pension completely tax-free. It will depend on your provider though.

Innovative finance ISA

This is a peer-to-peer system that lets investors borrow from each other which can lead to higher interest rates and more flexible repayment periods. However, they are not regulated so can be much riskier.

Lifetime ISA

As the name suggests, these can be opened by anyone over the age of 18 and under the age of 40 and will accumulate untaxed interest for decades. There is, however, an annual deposit limit of £4,000.