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Tax Efficient Savings & ISAs

There are many ways to ensure you are making the biggest tax savings on your investments. And with so many tax-efficient savings & ISA vehicles available, all with their own advantages to consider, it’s impossible to cover them all here.

There are a number of saving & ISA vehicles available, that will allow you to invest for tax efficient purposes. At Skybound Wealth Management we offer a wide range of choice for investors, giving them the ability to make a choice suited to their own preferences and priorities.

All Types Of ISAs

The most common tax efficient savings tool is an Individual Savings Account (ISA for short).  A cash ISA is essentially a savings account where you don’t pay tax on the interest you earn, while a Stocks and Shares ISA allows you to invest your money and not pay tax on the returns you receive.

For those who fall into the higher-rate tax bracket, other vehicles that provide legal ways of reducing your tax bill should be considered. Venture Capital Trusts and Enterprise investment schemes are designed to generate investment into small businesses by offering incentives and tax relief in return for your money.  Such incentives can often result in higher returns to reflect the greater risk.

ISA Types Currently Available

Cash ISAs

Essentially, cash ISA’s are similar to a general savings account in that you can make either regular or a lump sum deposit.  However, the key difference is that you will not be taxed on any interest you earn.  Any UK resident over the age of 16 can hold a cash ISA and deposit up to £20,000 each tax year.

Stocks & Shares ISAs

For those looking for an ISA that has the potential to provide a higher return and aren’t deterred by greater risk. Rather than basic current account, a stocks and shares ISA as its name suggest allows the investor to put their money into a range of investments such as shares, bonds and investment funds.

Innovative Finance ISAs

Launched in 2016, innovative finance ISAs provide savers with the opportunity to invest via peer to peer loans. When your money is loaned out, the borrower will pay back the initial amount plus interest with a pre agreed % of the interest being paid to the investor as returns.

Lifetime ISAs

If you are aged between 18-39 you can open a lifetime ISA as a tax efficient way of saving for either your first house or your retirement. Each year you can invest up to £4,000 every year until your 50th birthday, and the government will contribute an annual bonus payment of 25% (up to £1,000). If you initially open a lifetime ISA to save for your first house but then change your mind, you can just save towards your retirement instead. Withdrawals for other reasons are permitted, however any funds will be taxed at 25%.

Junior ISAs

If you want to put money aside for your children, a junior ISA allows parents and other relatives to deposit up to £9,000 per year.  There are two types of Junior ISAs; cash or stocks and shares. Both of which work in the same way as their standard counterparts.

What are the risks?

With a cash ISA the biggest risk savers face is underperformance, a lack of return. Interest rates remain at record low levels and returns offered by cash ISAs reflect this.  Stocks and shares ISAs are reliant on the performance of shares which can go up or down, and peer to peer loans are subject to borrowers being able to meet their repayment terms.

As with anything, the greater risk usually offers the potential of a larger return. Our team of Advisers are perfectly placed to discuss which product suits your needs whilst outlining the pros and cons of each type of ISA.

Talk To Skybound

Knowing the correct investment vehicle for you can't be determined simply by a quick glance on the internet. This would require an in-depth review of your current situation and your aspirations for the future. Contact Skybound now to arrange a complimentary consultation with one of our financial planners to understand what's right for you.

Tax Efficient Savings FAQ’S

What is meant by Enterprise Investment Schemes and Venture Capital Trusts?

Enterprise Investment Schemes (EIS) are designed to help small companies raise finance by offering tax breaks to investors who purchase new shares in those companies. The maximum investment contribution is £2m. As a result, you can receive 30% income tax relief which can be offset against your earned income for the tax year. EIS shares must be held for 3 years otherwise the income tax relief will be withdrawn. Both of these encourage investment into smaller UK companies by offering tax relief, as you are a higher rate tax payer it may be worth exploring these in more detail.

How does the tax work in an ISA?

ISAs are effectively tax free and you are able to contribute £20,000 per tax year per person. Any growth, interest or dividend from the ISA is free of capital gains tax and any withdrawals are free of income tax.

Who can open and ISA?

Anyone over the age of 16 years old, if you are under that age you do have an option of opening junior ISA with a limit of £9000 per tax year.

Talk To An Adviser

You can reach us directly by calling us between the hours of 8:30am and 5pm at each of our respective offices and we will immediately assist you.

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Talk To An Adviser

You can reach us directly by calling us between the hours of 8:30am and 5pm at each of our respective offices and we will immediately assist you.

Request A Call Back

By completing this form, you are consenting to receive telephone communication from Skybound Wealth Management Ltd, in accordance with our Privacy Policy.
Thank you!
Your call back request has been received and we will arrange for a member of our team to call you at your desired time.
Oops! Something went wrong while submitting the form