Learn about Saving Tax

It’s often said that the only two certainties in life are death and taxes. Well, as cheery as this thought is, there are things that we can help you with to minimise your liability to taxes.

With some careful financial planning, you can look to build a ‘balanced portfolio’ of tax efficient investments. In other words, making sure you’re not putting all of your eggs into one basket. How you tackle the structure of your own ‘portfolio’ will be an issue unique to your own personal situation and attitude towards investments, risks and your future needs.

So before you can consider which financial products are for you, you will need to consider:

• Do you need access to funds? Are you likely to need quick access to funds, or can you afford to tie up funds in longer term investments.
• What’s your financial timescale? Are you saving or investing for the short term or the long term?
• What’s your attitude to risk? The level of risk varies between different products. Make sure that you consider the risk element of each investment you make – whilst potential returns can be attractive, you have to balance this with the possibility of getting back less than you originally invested. If in doubt, get specialist advice.
• What lifestage are you at? Your age and personal situation will have a big impact on your need for products and services. If you are approaching retirement, then your needs will differ from a new graduate.
• What are your financial objectives? As with your Lifestage, your financial objectives will be very personal to yourself. Maybe you are looking to buy your first home, retire abroad, start a family, or perhaps none of these.

Having looked at your own personal objectives and attitudes towards savings and investments, it’s worth looking at savings and investments that offer you certain tax benefits. By spreading your savings and investments, you can look to minimise the tax that you pay by taking advantage of your personal tax allowances. These include:

• Individual Savings Accounts (ISA’s). Offer you up to £7,200 per year tax-free savings
• National Savings and Investments (NS&I). These savings and investments, backed by the Treasury, include:
  
  
• Fixed Interest and Index- Linked Savings Certificates (For people aged over seven)
• Children’s Bonus Bonds (Invest for children under 16, for up to 5 years)
• Premium Bonds (Offer the opportunity to win tax-free prizes)

• Child Trust funds. Parents, family and friends can invest up to £1,200 per year into child trust funds.
• Bank and Building Society Accounts. If your taxable income is less than your tax allowances you can register to have your interest paid ‘gross’ (i.e. without tax taken off).
• Pensions. Pension contributions are given tax-relief by the Government, to encourage people to save for retirement.

Take a look at our Inheritance Tax guide to help with your tax planning. For expert financial advice, why not speak to a Legal & General Financial Adviser in a local Bradford & Bingley branch.