Individual Savings Accounts (ISAs)

• Individual savings accounts (ISAs) are tax free savings accounts which allow you to save a limited amount of money tax free per year. The maximum tax free savings limit is set annually by the government and is the maximum amount that is allowed to be invested in any ISA at any point in time throughout that tax year. To open an ISA account, you should be a resident of the UK, over 16 years of age for a mini cash ISA and over 18 years of age to open a regular ISA or a stocks and shares ISA.
  
  

Savings Certificates

• Savings certificates are tax free investment certificates which are sold in issues, each with their own rates and terms and conditions, ranging from investment periods of two to five years, and investment amounts of £100 to £15,000. There are multiple issues per year, which allow you to invest more cash tax free. To gain the maximum investment return possible on your savings certificate, it is best to wait till the end of the investment period before withdrawing any money as the interest rate usually increases towards the end of the certificate's life. Once the certificates have matured, you have the option to either cash in the certificates or transfer the funds to a new savings certificate.
  
  

Children’s Tax Free Savings Accounts

• Child trust funds are tax free savings accounts specifically designed for children. Parents with children that were born after September 2002 are entitled to a £250 payment from the government, with a further payment of that value when the child turns seven years of age. This money must be invested into a child trust fund which can then be topped off up to £1,200 each year. There are three types of child trust funds to choose from: a cash child trust fund, a stocks and shares child trust fund and a stakeholder child trust fund. They each have different levels of risks and terms of conditions which must be examined carefully before deciding upon which will suit each individual's circumstances; and although all three have a limit set for the amount of capital that can be invested, the total balance account and any returns made are guaranteed to have no tax consequences. The child will have access to the money when he reaches 18 years of age, at which time he can choose to withdraw or re-invest it.
  
  

Advantages To A Tax Free Savings Account

• There are many advantages to opening a tax free savings account, mainly the idea that you are saving money that would otherwise have been lost to taxes. Other advantages include the opportunity for a regular investment or to save on behalf of a child, ensuring money for the future with savings options to suit all and with no minimum monthly investments initially set.
  
  

Disadvantages Of A Tax Free Savings Account

• The majority of tax free savings accounts come with their drawbacks as well. Some of the options, such as the stocks and shares savings, can be risky, and the money in the tax free savings account is often not accessible. There may be restriction limits in terms of minimum and maximum investment values, with costly penalties incurred if the investment terms and conditions are broken.