Dealing with Tax

Tax Efficient Investing

1

Paying tax on investments is a controversial issue. Tax-efficient investing is not necessarily about paying as little tax as possible, it’s more so about paying tax when you are supposed to.

2

Governments often create a number of different investment accounts that carry tax benefits, in order to encourage individuals to save more money or to help people prepare for their retirement.

3

Governments generally want people to save more as it reduces the burden on public funds. An example in the UK is the ISA, which allows people to invest £20,000 every year without paying tax on profits.

4

Tax-efficient investment accounts often come with strict rules that investors should know about. A common rule is that you cannot withdraw money before retirement without paying a penalty fee. 

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1. How much can you expect to earn from a cash investment?

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