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Were you one of the many millions
of people who invested through a Tax Exempt Special
Savings Account (TESSA), initially introduced during
1991? If so, how do you now make sure that you keep
as much of your maturing money as possible out of the
taxman's hands?
Tax-free interest
The idea was that you could put aside up to £9,000
over a five-year period and earn tax-free interest
throughout the term. Withdrawals were not possible
if you wanted the full tax break to remain intact.
At the end of the five-year period, you were given
the chance to re-invest in follow-on accounts.
Maturing money
If you are about to receive the proceeds from a follow-on
account taken out in 1996, you need to consider the
available options if you want to find an appropriate
new home for your money. When your account matures,
you will be sent a maturity certificate. At this point
it is important to remember that you are not tied
to the same company if you want to reinvest some or
all of it.
'Inland Revenue rules say
that if you fail to re-invest TESSA money into an
ISA within six months of a maturity, then you lose
the right to do so for good.'
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solutions: A new home for your TESSA proceeds!
Transfer the capital,
but not the interest it earned, into the cash
component of a tax-free ISA by using a mini
cash ISA or the cash component of a maxi ISA
if your maxi provider offers one. Money that
you pay into this type of ISA up to certain
limits will not count against your normal annual
allowance.
Transfer the capital,
but not the interest, into a special TESSA-only
ISA - an option for people who want to move
TESSA money into ISAs but do not want to follow
the mini ISA route or use the cash component
of a maxi ISA. So if you are a keen investor
and want to use your full allowance for stock
or bond market investments, you will have to
pick the TESSA-only option. Again, any money
up to certain limits you pay into this type
of ISA will not count against your normal annual
allowance.
Look for a new, tax-efficient
home for the interest you earned on your TESSA
over the past five years. You could use this
to pay off debts, fund contributions into your
normal ISA, make a one-off contribution into
your pension, pay off a slice of your mortgage
or put it into a more adventurous investment.
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If you would like to discuss
the options available for your maturing TESSA proceeds,
please e-mail
or contact us for further information.
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