Deposit Based Investment
There are various deposit-based investment vehicles available in the marketplace. Many customers will have money on deposit either with a bank or building society.
Every basic rate taxpayer in the UK now has a Personal Savings Allowance of £1,000. This means that the first £1,000 of savings interest earned in a year is tax-free. If you are a higher rate taxpayer (40%), then your allowance is £500, and 45% taxpayers have no savings allowance at all.
Commercial banks offer a variety of deposit accounts. Interest, which varies in line with the general level of interest rates, is paid net of 20% tax.
Non-tax payers are able to reclaim the tax deducted or arrange to have the interest paid gross. Basic rate tax payers have no further liability and higher rate tax payers will be liable to a further 20% on the gross interest. Additional rate tax payers liable will be liable to a further 5% on the gross interest on top of the higher rate of 20%.
Building societies also offer a variety of savings accounts each with different terms and conditions. Interest earned may be fixed for a specified period or vary in line with interest rates generally. Interest will be paid net of 20% tax.
The tax position is the same as commercial bank deposit accounts. Some accounts may restrict access to the money in the account and there may be penalties for early withdrawals.
You can have one cash ISA up to the limit of £20,000 each tax year with one provider.
Any ISAs opened between 6 April and 30 June 2014 will automatically become a NISA, with a higher limit. From 1 July 2014, you are able to add further money up to the new £20,000 limit.
From Autumn 2015 individuals will be able to withdraw money from their cash ISA and replace it in the same year without it counting towards their annual ISA subscription limit for that year.
The cash ISA can consist of money on deposit enjoying a tax-free environment. The minimum age to own a cash only ISA is 16.
Cash Junior ISAs are now also available. Your child can have a Junior ISA if they:
- are under 18
- live in the UK
From 6 April 2015 it became possible for parents to transfer their children's Child Trust Fund (CTF) account into a Junior ISA (JISA). At age 18 a JISA will now automatically turn into an adult ISA.
National Savings & Investments
National Savings & investments are Government backed. You can visit the NS&I website here http://www.nsandi.com/
The Financial Conduct Authority does not regulate advice on deposits or National Savings & Investments products.