Tax-free investments
There are various investments that are tax-free. Some are available to everyone and others to those whose income is under their personal allowance.
Individual Savings Account (ISA)
The Individual Savings Account were introduced on 6th April 1999 to encourage long term saving.
ISAs are tax-free investments that replaced PEPs and TESSAs. Any UK resident who is over 18 can have an ISA (although cash ISAs up to the value of £3,000 are also available to 16 and 17 year olds).
ISAs can be made up from one or more elements:
- Savings accounts (cash).
- Life insurance.
- Share-based investments.
A MAXI ISA means that all elements are contained within a single ISA, whereas a MINI ISA means that elements are kept within separate ISA accounts.
The maximum you can invest in an ISA is £7,000.
The government has guaranteed ISAs to run until 2009.
National Savings Bank ordinary account
The first £70 of interest credited to the National Savings Bank ordinary account is free of tax. Interest over this amount is taxable. All interest is paid gross on this account.
Deposits can be between £10 and £10,000.
Other tax-free investments
If your income from all sources is below your annual personal allowance (£5,225 for 2007/2008), you can register to have your interest paid gross on your bank or building society account (i.e. without the deduction of tax). You will need to contact your bank or building society for Registration Form R85. If you are in any doubt about whether you can register for this, you should ask your local tax enquiry centre or call the HM Revenue & Customs Registration Helpline on 0151 472 6080.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
