Whilst interest rates are currently rather low, there are still some tax-efficient saving incentives that can help maximise potential savings.

What is the help-to-save?

The help-to-save scheme is direct at working people on low incomes, giving them a 50% bonus, so for every £1 saved, 50p is added. Over the course of four years, the bonus has a cap of £1,200 on savings of up to £2,400. Saving limits are flexible and it is not necessary to pay in every month to get a bonus on savings.

Investors in this scheme can save between £1 and £50 every calendar month, up to a maximum of £2,400 over a four-year period.

Accounts last for forty-eight months from the date that the account is opened. Government bonuses are added two years in, and at the end of the four-year life-span, or on the date that an individual becomes terminally ill or dies.

Accounts can be opened until September 2023, and can be held by anyone who:

  • receiving Working Tax Credit.
  • entitled to Working Tax Credit and receiving Child Tax Credit.
  • claiming Universal Credit and their household earned £604.56 or more from paid work in the last monthly assessment period.

ISAs and Junior ISAs

The maximum annual investment limit for Individual Savings Accounts (SAs) remains at £20,000 for 2020/21. As such, a couple can save £40,000 per year and receive interest on the investment tax free. There is also no capital gains tax to pay when the account is closed.

Junior ISAs are made available to UK-resident children under the age of 18 and are similar to regular ISA accounts. The maximum investment amount has increased significantly to £9,000.

Help-to-buy ISAs and equity loans

Help-to-buy ISAs continue to be available to assist first-time buyers that want to save enough money for a deposit to purchase their home. Up to £200 a month can be saved in the ISA, alongside an initial deposit of £1,000, and a maximum of £12,000. If certain conditions are met, then the Government will provide a 25% boost to savings, up to £3,000 per person. As such, a couple could save up to £30,000 tax-free towards purchasing their first home.

The Help-to-buy loan equity scheme for new-build properties helps those that have 5% deposits. The Government can lend up to 20% of the property price and after five years the purchaser starts paying interest on the loan. The scheme is now only open to first-time buyers and lower regional price caps are applied.

What are premium bonds?

Premium Bonds are a very popular way of saving, with a 1.40% return rate. The minimum amount of PBs that can be purchased is £25 and the maximum that can be held is £50,000. Anyone over the age of 16 can buy PBs for children. The odds on winning a prize in any one month are currently 24,500 to one. There are currently two £1m prizes, five £100,000 prizes and ten £50,000 prizes each month. Although these are not strictly classified as an investment, they can be encashed at any time, with the full amount of invested capital being returned. In the meantime, any returns by way of ‘winnings’ till be tax free.

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Any questions?

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