Truism (for saving money #2)

A good form of saving is the avoidance of tax.

 

Personal thought - This realisation came to me when bank interest was as low as I can remember (in 50 years) and I needed more of what I earned to stay with me. 

Tax avoidance, as opposed to tax evasion (illegal) is where I am now and I tell you this from the perspective of being a UK resident. 

The biggest dent in take-home money is taxation of all "taxable money*" that comes to yourself and whose amount exceeds a nominal poverty-level "personal allowance", dictated in law by the state. For the majority of people this tax is 20% and upward. This is money taken by the state that you should aim to keep, to help you and your dependants.

Tax avoidance is a career for many professional advisors but many other advice sources are free; to either of these you should turn for  research for your own circumstances.

For me and my partner, our monthly income is fixed and savings are not funding our retirement as they should, but we have a solution.

I found my wife's pension would never exceed her personal allowance and that, as spouses, she could transfer that part of her unused personal allowance to me, i.e. £2000 of my earnings suddenly became non-taxable, making me/us better off by the amount of tax I formerly paid when that £2000 of my income attracted taxation. (£400/year)

Our life savings were devaluing with inflation and terrible interest rates didn't help, so we moved all of those savings into 2 equally apportioned Premium Bond holdings, such that any winnings (tax-free) would either buy more Premium Bonds, or be paid to our current account. Returns were tax free and poor, but better than virtually nothing from the banks; it's like gambling with your savings without any likelihood of losing it, but it minimises exposure to tax on money we earn/win.

As bank interest rates began to rise (currently 4%) we realised our Premium Bonds were not achieving this so we thought we would move our life savings back to a bank, but being aware that only the first £1000 of bank interest is given free of tax, equating to £24000 max per person, we placed some money in an ISA (because it's returns are tax free) and now monitor and balance our life savings (in the bank or as Premium Bonds),  in order to never pay tax on any of their returns. 

We are trying to avoiding tax on our life savings as best we know.

* Taxable money is money that comes to you, by whatever route, that is deemed taxable by the state and is above that deemed to be non-taxable (tax-free).  E.G. ISA's, Bank interest below £1000/person, profit from the sale of your primary dwelling, bank loans, etc. To see what tax you might pay (in the UK) take a look here.