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Mar 12

Tax Free Investments

Posted by abiao at 08:42 | Default | Comments(1) | Reads(1420)

Many people look for a tax free investment so that they get a better return on their money. It is worth looking around for these, but do compare them to other investments as well.

It is worth being aware that you will only pay tax on your return on an investment if you receive more than the tax limit. If you are in full-time work, then this is likelihood but if you are retired or not in work, you may not have to pay tax anyway. This will depend on your income and how much it is. You may need to complete a self-assessment form to let the tax office know all of the details.

It is important to find out how much you can earn before paying tax and finding out whether you are liable to pay it or not. You can discuss this with the tax office and they will talk it through with you, but the information is also available on their website.
If you are paying tax and you want a tax free investment, then you can use an ISA. This gives you a certain allowance each year where you can receive an interest on an investment or savings without having to pay tax on it. There are also additional ways of investing without paying tax on your returns such as Premium Bonds and certain Friendly Mutual accounts. These can all seem really good, but it is so important to compare the interest rates and costs of them to other opportunities. You may find that it is better to invest in something that does attract tax because the return is so much better than a tax free option. For example Premium Bonds tend to pay out on average 1.5% although there is a risk you will get no return at all but you could get a lot more – it is rather like a lottery. Investing in the stock market could give returns of 10% and so paying tax on that would still give a generous amount back. There is a risk of course with any sort of investment and those that promise the highest returns tend to have the biggest risks and some may even end up with you paying out more money than you invested in. So you need to do your research well.

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