Posted by: Ankit Agarwal in Taxes April 30, 2013 Comments Off 2625 Views

In the UK, most investment and savings opportunities are subject to tax. However there are some tax free options which are open to everyone, and which will allow you to see a maximum return on your money.

These kinds of tax efficient investments and savings opportunities generally come with guidelines and rules as to who can save, and how much. But if you’re savvy, you can use these rules to your advantage.

Choosing Your Tax Friendly Investments

There are many different types of tax efficient investments which you can take advantage of in the UK. These include:

• Individual Savings Account (ISA)
• Venture Capital Trust (VCT)

• Enterprise Investment Scheme (EIS)
• Pensions

The benefits of each type of investment will depend on why it is that you have chosen to save. If, for example, you are investing for your retirement age, then using a pension can be a very good idea. Pension contributions are all tax free, and tax only comes into play when your pension is converted into income.

If, however, you are saving for a specific purpose which will require your having access to your money in the next few years, you may wish to consider the benefits of an ISA. ISAs are great for anyone wishing to save for 2, 3 or 4 years, and give you the opportunity to invest up to approximately £11,500 per year. tax free.

Varying Your Investment Portfolio

If you’re thinking about making some tax free investments, it’s a good idea to diversify your portfolio. As with any type of saving or investment strategy, this will help to ensure that you see the best financial return.

In addition, since many tax free investment opportunities tend to have caps on the amount you can invest in any given tax year, diversifying your portfolio will allow you to make a greater overall deposit, spread over several accounts. At the end of your investment period, this money can be safely stored in a high interest account.

Beware the Risks of Investing

Investing is not always as straightforward as it seems, and there are risks involved with almost every type of investment. When building your investment portfolio, make sure to always read the small print. Some investment opportunities levy fees for early withdrawal, and others carry with them extortionate annual charges. So if you’re keen on making the most of your investments by avoiding needless tax, make sure your money doesn’t get wasted elsewhere.