Investments

Tax Efficient Investments

ISAs

With most savings accounts, you pay tax on any interest earned on your savings.  However, no tax is payable on interest earned on money invested in an ISA.

Because of the significant benefit of avoiding paying tax, the Government introduced limits on the amount which can be invested in ISAs in any one tax year.  You can save up to £7,200 in an ISA account in this tax year, and avoid paying tax on the interest you earn.  Note however, that only £3,600 of this allowance can be invested in a cash ISA, with the rest only being eligible for investment in a stocks and shares ISA.

There are many different ISAs available on the market today, offering varying levels of interest.  You would therefore be advised to shop around to find the best deal.

Investments for Everyone

Options available include:

• Managed Investments
• Managed investments, as the name suggests, are managed on your behalf by expert fund managers
• There are a number of different ready-made funds available, offering differing risk profiles and different returns
• Fixed Term Investments
• These are suitable for individuals who want their investment to mature at a particular point in time
• Some investments offer guaranteed interest, while others offer guaranteed capital repayments at maturity
• Regular Income
• This type of investment, allows you to invest a lump sum and receive a regular income in return
• Again there are a number of options available, such as ‘with profit’ income funds
• Stockbroking
• Share dealing allows you to manage your share portfolio by buying and selling shares
• Spread betting allows you to bet on changes in the value of shares, markets, currencies, commodities etc
• Foreign exchange trading allows you to profit on relative movements of currencies

Investments for Children

You may wish to put a little cash away to help fund your children’s University education, or to pay for a gap year before or after University, or maybe to help your children to get on the property ladder with a deposit.
Whatever your goal, there are a number of investment options specifically designed for children:

• Children’s Savings Accounts
• These are offered by banks and building societies. They pay a fixed or variable rate of interest, and are an easy way to save for the future. They could pay interest tax-free, if the child or their parent fills out form R85.
• Cash ISAs
• A child can have a cash ISA once he or she reaches the age of 16. They can invest up to £3,600 every tax year and the interest is automatically paid tax free.
• Children’s Bonus Bonds
• These come from National Savings and Investments and can be bought for a child under the age of 16. The returns are tax free but you have to leave the money for at least five years.
• Unit Trusts, Investment Trusts, OEICs
• These invest in a wider range of assets, such as stocks and shares and bonds. They offer the prospect of higher returns but are riskier than cash based investments.

Investments for Retirement

The most common method of investing for your retirement is to invest in a pension.

 

Further Reference

For further reference, see our links page