Tax on NS&I savings

oldmike

Hi, I am looking at investing largish lump sum but want it 100% safe. Although I don't need the income per se and will re-invest the interest, I am looking at NS&I Income Bond because the rate is higher than their investment account but I cannot figure out how it is taxed. Do you get the first £1000 of interest tax free like a normal building society/bank account or, because it's an income bond do you pay income tax on the first £1 of income? I am a basic rate tax payer. Would love to hear from anyone who has experience of this...thanks

respectmymonah

To minimise any tax you could stick the first £50k in premium bonds and the rest in income bonds.

Swipe

NS&I Income Bonds are taxed the same as normal savings accounts, so the £1K savings allowance applies

Albermarle

respectmymonah said:

To minimise any tax you could stick the first £50k in premium bonds and the rest in income bonds.

Plus the effective interest rate on Premium bonds is marginally higher than the income bonds .

colsten

NS&I (like any other savings provider) will pay you all the interest gross, without any tax deduction. It is between you and the HMRC whether and how much tax you have to pay on it.

If you are a BR tax payer and get under £1,000 in interest, from any source(s), you don't need to do anything. If it's more than £1,000, you must tell the HMRC. If you are a HR tax payer, you only have £500 in tax free interest.