If you invest or save money, unfortunately you will normally have to pay tax on the interest or income you get, but there are some savings and investments that give you a tax-free return. This article summarises the most common tax efficient vehicles that everyone should consider before deciding how to save. Saving tax means saving money!

ISAs (Individual Savings Accounts)

ISAs are tax favoured savings and investment accounts. You can use them to save cash, or invest in stocks and shares. The maximum you can put in to an ISA is £7,200 in each tax year.
You don't pay any tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax.

National Savings & Investments

National Savings and Investments offer a totally safe way of saving and investing money because it's backed by the Treasury.Tax-free savings and investment products from National Savings &Investments currently include:

• Cash mini ISA - for savers aged 16 or over.
• Fixed Interest and Index Linked Savings Certificates - for savers aged 7 or over.
• Children's Bonus Bonds - can be invested for five years on behalf of children aged under 16.
• Premium Bonds. If you buy them, you won't get interest, but you can win tax-free prizes.

Child Trust Funds

If your child was born on or after 1 September 2002, you'll get a £250 voucher from the government - and an extra £250 payment if your income is below a certain level - to set up a Child Trust Fund account. Once you've opened a Child Trust Fund account parents, family and friends can add up to £1,200 to the account each year.
Neither you, nor your child will pay tax on any income or any gains in the account until your child reaches age 18.

Bank and building society accounts

Banks and building societies usually take tax off interest at the rate of 20% before they pay it to you. But if your taxable income is less than your tax allowances you can register to have your interest paid 'gross' (without tax taken off). You can also claim back tax you've paid on your savings when you didn't need to.

Pensions

The Government encourages you to save for your retirement by giving you 'tax relief' on pension contributions. Tax relief reduces your tax bill or increases your pension fund.
When you retire, providing your own pension scheme rules allow, you can usually take up to 25% of your pension fund as a tax-free lump sum. Your regular pension income is then taxed in the same way as the rest of your income.
New pension laws mean you can save as much as you like into any number of pensions - and get tax relief on contributions of up to 100% of your earnings each year, subject to an upper 'Annual Allowance'.