Tax is an unavoidable part of life. But there are ways of reducing the amount you pay on your investment returns, which could make a big difference to your financial future.
Each year, you’ll receive a new ISA allowance which can be used to shelter a portion of your money from capital gains tax and income tax. The allowance is currently £20,000 for 2019/20. It’s worth taking advantage of this allowance every year – because if you don’t, any unused amount cannot be carried over to the following year.
And it’s not just ISAs. Pensions are another tax efficient way of investing over the long-term. Not only can you hold money in a pension free from personal tax; you can benefit from tax relief. This means that for every £80 you pay in, you’ll receive a further £20 in your pension pot. If you’re a higher rate or additional taxpayer, you can claim even more tax relief through your tax return.
You can start to access your pension from 55 (changing to 57 from 2028) and there are tax considerations applicable to withdrawals.
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