Tax is a killer and everyone is trying to find ways to avoid it. Whether it comes to getting tax free money or reducing tax, it pays off doing anything you can to ensure you do not pay more tax than you have to. Luckily, there are ways to save and make money for your family, children and grandchildren without giving the tax man too much. So, what are your best rated options out there?
Becoming familiar with ISAs
An ISA is basically an individual savings account. If you save your money in a cash ISA, make sure you know when the introductory rate reaches to an end, so you can start shopping around. Some banks referred to these investments as NISAs. They are tax efficient and can provide excellent choices for some further investments.
Goals vary widely from one individual to another. Some people use their ISAs to save money. Some others would rather invest the money, whether it comes to shares or stocks. The best part about ISAs? No matter how much interest you gain, dividends or other profits, you will not have to pay income tax on the money.
Understanding how NS&I work
National Savings and Investments (NS&I) are not to be overlooked either. Whenever you save, you want peace of mind. You want to ensure your money is safe. Such options are safe because they are backed by British the government, so there is nothing to be concerned about. Furthermore, there are more options to take in consideration when about to save.
Cash ISAs are quite attractive and common. While children’s bonds are no longer available, those who have managed to sign up can still use them and their options go in even more directions. The good news is that many of these savings products are tax free, so you will not be charged for your hardly earned money.
Premium bonds are issued by NS&I. They do need a special category themselves because they come with numerous differences from classic savings accounts. This product is also backed by the British government, so there are not too many risks involved in the long run. There is one thing these bonds stand out in the crowd for.
Compared to other investments, these bonds do not give you too much interest. They do not provide regular dividend income and if they do, it is small. Instead, everyone goes into a monthly prize draw. Prices are highly diversified and range between £25 and £1 million. Surprisingly enough, such prizes are tax free.
The British government provides tax relief on pension payments, as it tries to encourage people to save for retirement. There are more types of pension schemes out there and each of them has its own specifications. Some of them provide tax relief, while others supplement the relief by increasing the amount paid into the account too.
On top of all these, the pension fund will grow in a tax free way. As you retire, you can easily ask for 25% of the actual fund – no taxes. However, these rules tend to change every now and then. If you are still young and retirement is decades away, things might be different.
Bottom line, there are more options out there to reduce your tax for savings. There are ways to overcome the tax man and the above mentioned methods represent the most popular choices. Which one is more suitable for your unique case depends on your circumstances, preferences and long term plans. Make sure you understand each option before making a final decision for your savings.