A little-known trick has emerged that allows UK savers to secure a guaranteed 7% return on their savings for five years, while also benefiting from a potential cut in their inheritance tax bill. This unique opportunity has been made available through certain types of Individual Savings Accounts (ISAs).
ISAs are a type of savings account that allows individuals to save up to £20,000 per year tax-free. However, some ISAs offer a guaranteed return on investment, known as a fixed-rate bond, which can provide a higher interest rate than a standard savings account.
The fixed-rate bond in question offers a 7% return on investment for a fixed period of five years. This is significantly higher than the current interest rates offered by high street banks, which typically range from 1-2%. Additionally, the bond can be used to reduce inheritance tax liabilities.
For those unaware, inheritance tax is charged on the value of an estate above £325,000. However, using certain types of ISAs, such as a Fixed Rate Cash ISA, can help reduce the amount of inheritance tax owed. This can be particularly beneficial for those with larger-than-average estates or those approaching retirement.
According to a statement from the Bank of England, the current inflation rate stands at 2.5%, with interest rates at 5.25%. This has led to a surge in demand for fixed-rate bonds, as savers seek to protect their savings from inflation and potential market volatility.