Saving tax free – what are your options?

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Whatever your income and your potential for savings there are great tax free options out there. Here we’ll take a look at the best tax free savings vehicles available in the UK.

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Individual Savings Account

An Individual Savings Account or ISA is one of the best ways to save tax free in the UK. For the current tax year you are able to deposit a total of £11,280 into an ISA. The situation is best described by looking into both cash and investment ISA opportunities

Anyone over the age of 16 can deposit £5,640 into a cash ISA. The ISA itself is a tax free wrapper whereby as long as the savings are held inside the wrapper, they will be sheltered from the tax man. Any interest made is therefore tax free.

For the investment savvy, this tax free saving option can be best utilised through an investment ISA. This enables the full £11,280 to be invested within an ISA. Whatever income is made on the range of investments you choose will be free from income tax (cash interest, share dividends and bond payments) and Capital Gains Tax (levied on sale profits above a certain level). You don’t even need to declare these interests on your tax return. It’s a simple way of increasing your income, without the requirement to pay tax.

You can choose to invest the full amount into an investment ISA or split it between the two, with £5,640 in each.

Most ISA providers offer this tax free savings wrapper free of charge. If it’s there – there’s no reason why you shouldn’t use it.


Preparing for retirement may seem a long way off, but it should never be something which is ever ignored. Putting a valuable nest egg in place for retirement is just as valuable as preparing for the next few years of your financial future.

One of the best options when it comes to saving for your retirement is through a self invested personal pension scheme or SIPP. This is a DIY pension which gives you full control of your retirement savings, thanks to a great combination of low charges, flexibility and a great range of investment options including units trusts and OEICs, any securities quoted within a registered stock exchange, government bonds and corporate bonds, and investment trusts; amongst others.

SIPP contributions gain tax relief, meaning that an £80 contribution from a basic tax rate (20%) taxpayer gets £20 of tax relief and thus becomes £100. For higher rate tax payers a bigger rate of tax relief can

be gained.

So, which is better?

There is no right answer to this question; as both ISAs and SIPPs offer a shelter from tax and the opportunity to really build on your savings. It may be the case that you can access this from your ISA now, whereas with a SIPP being a pension plan you cannot get access to your funds until you reach retirement age; but it’s valuable that you have this in place for when you do retire.

The best way to go is to combine the two. Tax free savings for now and in the future.