Does the UK have something similar to the Roth IRA or Canadian TFSA?

candyflipper_2

Is there a type of investment account that you can contribute taxed funds to, and let it grow tax-free, and pay out tax-free?

turbobob

I don't really know what either of those schemes are, but an ISA is probably the closest to what you've described. As shown in the link you can invest in shares etc. through an ISA or it can be just cash deposits.

There is also some tax efficient savings through National Savings (e.g. NS&I inflation linked bonds).

Pensions are the other main tax efficient vehicle. These are more tax efficient than the above as you get tax relief on contributions. But they have rules about how and when you can take the money out (minimum age etc), and pension income is subject to tax.

LongTermLurker

Sounds like an ISA to me:

• Maximum £10200 per year from taxed income
• of that, up to £5100 can be placed in cash deposits
• £10200 less cash deposits can be invested in the stock market
• No Capital Gains Tax will be required
• No income tax on interest is required
• Capped income tax on dividends
• Only 1 cash ISA plus one stocks & shares ISA per year
• Year starts April 6 and ends April 5
• Other restrictions apply, but that's the basics

Also, National Savings & Investments is a scheme operated by the government and among other things they offer Index Linked Certificates. These are linked to the Retail Price Index (one of the measurements of inflation) and they issue a 3 year certificate and a 5 year certificate at any one time. Every so often, they will offer new "issues" and you can hold one of every issue, but can only put £15000 in each issue so

• you could put £15k in a 3 year issue today plus
• put £15k in a 5 year issue today plus
• put £15k in a new 3 year issue which they may offer in 6 months time plus
• put £15k in a new 5year issue which they may offer in 6 months time plus
• etc

Interest is complex, but is based on the level of inflation over the term plus x%, where x% varies from issue to issue (currently it's 1% above inflation). All interest is tax free.

One of the biggest benefits of the above is that as well as being tax free, income doesn't need declaring, so doesn't affect any benefits - great for the future as you may be able to get benefits even if you have ISA income that would otherwise preclude you.

Pensions, I guess, are similar the world over and have complex rules - you pay in out of untaxed funds, employers usually add a contribution, no tax is paid while it's growing and - when you're old and grey (gray ) - you can take 25% of the proceeds tax free and use the remainder to fund your retirement.

HTH

Paul_Herring

Equity ISA's are the closest you'll get to Roth.

Contributions are made out of post-tax income.
Increases in fund value are not taxed at all.
There are limits on the amount you can contribute.
No requirement to use the fund by age ~70

Differences:
There are no limits on income to gain eligibility to contribute.
The yearly contribution limit is higher.
There are no restrictions or benefits on using the fund to purchase anything.
Funds, upon death, lose any tax status - e.g. spouses cannot merge ISAs into their own ISA.