Tax-Free Savings
Savings held in tax-advantaged wrappers such as ISAs, where interest, dividends, and capital gains accumulate without being subject to UK tax. The annual ISA allowance of £20,000 is the primary route for most individuals to shelter savings from tax. Some savings interest is also covered by the Personal Savings Allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers).
Related Terms
ISA
An Individual Savings Account — a tax-free savings or investment wrapper that lets you earn interest, dividends, and capital gains without paying UK tax on them.
Dividend Allowance
The amount of dividend income you can receive each tax year completely free of tax, currently set at £500.
Capital Gains Tax
A tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets.