While the super-rich may move money offshore to try to save tax, you don’t have to. The government actively encourages us to take advantage of legitimate tax-efficient savings accounts to build long-term savings. Tax-exempt savings plans are affordable, long-term regular savings plans for adults and children that offer tax-free savings.
1. Payments don’t cost the earth
They are an affordable way to save for the future – you can save from as little as £10 a month, up to a maximum of £25 a month.
2. Your choice of savings term
You can choose how long you want to save for, with the minimum commitment being 10 years. It’s even possible to select the exact date that you receive your tax-free sum – for example, if you’re saving for a specific birthday or an anniversary.
3. High street banks can’t offer these plans
Only friendly societies can give you the additional tax advantages of tax-exempt savings plans, which provide you or your child with a cash sum payout at the end of your chosen term, free of capital gains tax and income tax. A tax-exempt savings plan can be held alongside an ISA, Junior ISA, Child Trust Fund or other children’s savings plans.
4. You won’t lose any money
With tax-exempt savings plans your cash lump sum payment is guaranteed to be at least what you’ve paid in, which means there’s less risk taken with your money – provided you continue to keep putting the agreed amount aside each month. There is also the possibility of bonuses being added to your plan to increase its value. However, the addition of bonuses is not guaranteed. Tax-exempt savings plans are longer term saving plans, so if you are unable to continue saving for the full duration of the plan, the amount you get back will be affected and in the early years could be very little, if anything.
If you would like to find out about tax-exempt savings plans and other tax-efficient accounts call us now on 08000 85 85 90 or email email@example.com and book an appointment with one of our professional financial advisers.
Other tax-efficient ways of saving
You don’t pay income tax on any income you get from an ISA or any capital gains tax on any growth. Think of ISAs as your very own tax haven. The annual ISA allowance is a currently a generous £20,000 (for tax years 2017 /18 and 2018 /19), that’s £40,000 for a couple. Junior ISAs are available for the under 16s – the maximum you can pay in is £4,128 (tax year 2017 /18) and then £4,260 (tax year 2018 /19). Lifetime ISAs (LISAs) have also been available since April 2017 to help young people save for their first property or for retirement.
Contributing to a pension is one of the most tax-efficient ways of saving, as you receive tax relief on your contributions at the highest rate of income tax you pay. You may need to claim some of this yourself if you are a higher rate taxpayer.
National Savings and Investments (NS & I) offer 100% secure ISAs. They also, amongst other products, operate Premium Bonds – prizes for Premium Bonds are tax-free.
- The value of your investments can go down as well as up, so you could get back less than you invested.
- Tax rules may change in the future and will depend on individual circumstances.
- Tax free means free of tax in your hands, however tax is automatically deducted from UK share dividends and cannot be reclaimed.