Ways to save in 2022
As we enter a new calendar year, it’s often a good time to look at the many easy and tax efficient ways you can save your money. Below we highlight some of the savings options available to you in 2022 and beyond.
ISAs – Individual Savings Accounts
All ISA accounts are free from Income Tax and Capital Gains Tax. The ISA limit for the current tax year is £20,000 and savers can choose to save their full allowance in one type of ISA or split the allowance across different types. These include:
- Cash ISA
- Stocks and Shares ISA*
- Innovative Finance ISA
- Lifetime ISA (more details below)
- Junior ISA (more details below)
The Lifetime ISA launched in April 2017 and helps those aged between 18 and 40 to save for life’s big events. As long as you opened an account before the age of 40, you can pay into a Lifetime ISA up to the day before you turn 50. Savers are able to withdraw the funds from the ISA penalty free for the following reasons:
- A deposit on a first home worth up to £450,000 (from 12 months of opening the account)
- If you become terminally ill
- From age 60
With a Lifetime ISA, you can save up to £4,000 per tax year and the Government will then top up 25% to the amount saved – so that’s potentially worth an additional £1,000 each year. Money transferred into a Lifetime ISA from another ISA is also eligible for the government bonus.
Junior ISAs are long-term, tax-free savings accounts for under 18s, and are structured like the equivalent ISA account available to adults. You can currently save up to £9,000 per tax year into a JISA and this is treated as a separate allowance to the £20,000 adult ISA limit. Parents can open either a cash or stocks and shares Junior ISA for each child, and contributions can be made by anyone at any point.
For a child holding a Child Trust Fund (CTF), a Junior ISA can only be opened if the CTF is transferred into the Junior ISA and the CTF is then closed.
On the child’s 18th birthday the account gets converted to an Adult ISA. Children between the ages of 16 and 18 can have both a Junior ISA as well as a basic ISA (they also benefit from both ISA allowances).
You can read more about the various options for children’s savings accounts in our recent blog.
Premium Bonds from National Savings and Investments (NS&I) are a savings product that doesn’t pay interest but offers tax-free returns in the form of a monthly prize draw. The minimum investment is £25 and the maximum investment is £50,000. An interest rate of 1% is used to calculate the prize fund but returns are not guaranteed.
Green Savings Bonds
In 2021, NS&I announced the launch of their new Green Savings Bond, a three-year fixed-term bond, where savers able to deposit amounts between £100 and £100,000. The Green Savings Bond has been designed to contribute towards financing projects with the overarching aim of making the World greener, cleaner, and more sustainable. Any money invested in Green Savings Bonds will go to HM Treasury who will then allocate the proceeds to its chosen green projects such as cleaner transport and renewable energy.
The interest rate is currently 0.65% gross/AER, and fixed for 3 years. You cannot take the money out until the Bond reaches the end of its term.
If you would like to discuss your tax-efficient saving opportunities any further then please get in touch with a member of our team on 01903 534587.
*Where a stocks and shares account is chosen, the value of your investments can go down as well as up, so you could get back less than you invested.