Tessa, your risk-free friend

Here's an offer that's hard to refuse: save pounds 9,000 over five years, then draw the interest tax free, roll over the capital and start all over again. That's a Tessa, the friendliest tax-free savings account you can meet.

Tessa stands for tax-exempt special savings account, and the name means just that: you do not have to tell the tax man about it. Because of the tax-free status of Tessas, many people think that, like Peps, they must involve an element of risk. In fact, they are as safe as any other kind of deposit account. There is no risk to your capital and in the unlikely event that the institution failed, you would get your money back, thanks to the Investors Compensation Act.

Whether you are transferring money from an existing, tax-paying account or making regular savings from your salary, you need to be aware of the limits on your Tessa. First of all there is the maximum investment of pounds 9,000 over five years. Then there are restrictions on how much you can invest each year. In the first year you can deposit up to pounds 3,000. Thereafter you can put in up to pounds 1,800 a year, except for the last year, when the limit is pounds 1,800 or, whatever lower amount will take you to the pounds 9,000 ceiling.

You cannot touch the capital until the end of the five years, but the tax man will allow you to withdraw up to 80 per cent of the interest earned since April this year, and up to 75 per cent of the interest earned before that date. However, the arrangements will vary from account to account, so if you think you may want an income from your Tessa, check the small print.

The limits on income withdrawal derive from the Tessa's tax-free status. The interest which you have to keep in the account until the end of the five-year term is what you would have to pay in tax, were the money held in a standard, taxable account

News
people
News
i100
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Sport
Club legend Paul Scholes is scared United could disappear into 'the wilderness'
football
Life and Style
food + drink
News
video
Sport
Malky Mackay salutes the Cardiff fans after the 3-1 defeat at Liverpool on Sunday
footballFormer Cardiff boss accused of sending homophobic, racist and messages
Finacial products from our partners
Property search
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests

India could be jewel in the crown for investors

With a new government and an ambitious prime minister, the country offers the prospect of strong returns. But there may be hiccups ahead, warns Simon Read

Child Maintenance Service to replace Child Support Agency - but is it better?

Reforms to the vexed question of child support payments by absent parents mean extra charges for both sides. Neasa Macerlean reports

Barclays's new life insurance heralds a revolution on the high street

The new product marks a shift towards 'clear, straightforward and standardised' banking products, says Simon Read

How to protect your assets if the stock markets begin to head south again

Are you worried about your portfolio? Nick Paler asks fund managers and investment insiders for advice
Fuel poverty campaigners united in criticising the delays in helping those in fuel poverty

Plans to tackle fuel poverty are slammed by campaigners

Charities and action groups believe that the Government's proposals are woefully inadequate
Sell it with flowers: competition is 'intense' for homes with outside spaces

Gardens add a tenth to the value of your home

A London estate agent yesterday put a price on having a garden. David Pollock of Greene & Co reckons it can increase a property's value by a tenth.

Spectators at the Isle of Wight music festival watch the World Cup on the big screen. Betting promotions were a feature of the tournament
Lenders have been accused of persuading vulnerable people to borrow expensive credit

Payday loan firms accused of bombarding vulnerable people with nuisance phone calls

Payday loan firms have been accused of bombarding financially vulnerable people with nuisance phone calls, after a debt charity reported that a third of its clients were plagued by the messages.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Head of Service and Support (Financial Services, ITIL, ORC, TT)

    £75000 per annum: Harrington Starr: Head of Service and Support (Financial Ser...

    Calypso Developer

    £700 per day: Harrington Starr: Calypso Developer Java, Calypso, J2EE, JAXB, ...

    Service Delivery Manager - ITIL / ServiceNow / Derivatives

    £60000 - £75000 per annum: Harrington Starr: A leading Financial Services orga...

    Senior Quantitative Developer

    £700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

    Magic circles: Artist Olafur Eliasson

    Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home