With tax free bonds UK citizens are allowed to invest a maximum of £25 per month with a friendly society, without being taxed on that investment. Even for individuals that already have an ISA (Individual Savings Account). Though it is every citizen's right, not investing in these tax free opportunities means you could be losing out on what these friendly societies have to offer.

Anybody between the age of 16 and 55 has the ability to invest in this manner. Compared with other forms of savings, account owners will have the ability to withdraw a lump sum, with increased interest accrued as well. It is important to know that there is a 10 year probationary period that limits how money can be withdrawn from the account. Most have penalties that mean money taken out before the initial 10 year period has lapsed may be reduced to less than has been paid in.

These tax free savings bonds remain free from taxation in two ways. While inside the account accruing interest, the money is completely free from being taxed. When a person decides to take their pay-out after maturity, all of that money is free from taxation as well. Customers also have the options of choosing monthly or yearly investment plans. Monthly payments can range from £15 to £25, while a yearly lump sum payment can range from £180 to £270 a year.

Facts About Tax Free Bond Growth And Maturity

Essentially, there are two separate factors that will influence how a person's account will increase beyond what has been invested. The first involves the guaranteed lump sum payment after the 10 year maturity period. All account owners are guaranteed a cash payment at any time after 10 years, which will be determined by the interest rate and amount invested. If payment is requested before the 10 year period, the lump sum will be less than the payments made. After that time frame, increased payments are assured, along with the potential for other bonus payments as well.

Other payments may apply to long-term growth accounts. These bonuses are determined by the overall profits made by the investment company you use for tax free savings bonds. Each company has a different means of determining these amounts, which will be governed by their own profitability and distribution rules for members. Projected total value is difficult, but most allow for between 4.75% and 6.75% a year for a tax free investment.

Some government bonds also allow for life cover as well. Depending upon the investors particular needs, adding extra services may or may not make financial sense. Compared with other types of investment, these bonds are extremely secure and offer a guaranteed increase in value when allowed to mature. Choosing the right investment company and amount should be considered a personal decision. UK government bonds make great alternatives to other investment strategies that can come with extensive amounts of risk.