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Tax Efficient Savings
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No, there are some types of investment that offer tax benefits to investors,
notably ISAs, Pensions and some National Savings investments.
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Not always, because depending upon your situation and investment type you might be
able to use available tax allowances. Each tax year you have two allowances
that may be relevant, your personal allowance and capital gains tax allowance.
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It is an annual allowance whereby income earned within that allowance is tax-free.
The level is currently £5,225 for the 2007/08 tax year (for those under age 65)
rising to £5,435 for 2008/09 tax year. This increases to £7,550 for those aged
between 65-74 for 2007/08 tax year and then to £9,030 for the 2008/09 tax year.
For those aged 75 or over the allowance is currently £7,690 in the 2007/08 tax year,
rising to £9,180 in the 2008/09 tax year. If you are currently working then it's
likely this allowance will automatically be used by your salary.
However, if you are not fully using your allowance then you might be able to
offset interest from some investment types against this.
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It is an annual allowance that allows you to realise gains on your investments of up
to £9, 200 for the 2007/08 tax year. To "realise" a gain you must actually sell the
investment concerned, so it may not be practical to use this allowance unless you
are actually intending to sell the investment anyway. Nonetheless, careful use of
this allowance over time could potentially reap significant tax savings. Gains in
excess of the allowance are liable to tax at your highest income tax rate,
although you can benefit from "Taper Relief" which reduces the tax payable the
longer the investment has been held.
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