Ns&i Green Bonds

ranciduk

Thanks but I don’t understand 

im classed as a basic rate tax payer I think 

would this mean 20% knocked off the interest earned  over £1000?

see, I thought I would get back about £3000 interest on maturity

but would it only be about £2600?

i may pass on it , if that’s the case!

ranciduk

bristolleedsfan said:

cx6 said:

Yes. Don't forget NS&I now pay all the interest in one go in year 3 (instead of paying it to your bank each year) so you may have a tax hit.

"We calculate the interest daily and add it to your Bond on each anniversary of your investment"

Why might there be a tax hit ???

They add it on each yearly anniversary - but don’t actually pay it all out until the end of the three year term?

InvesterJones

bristolleedsfan said:

cx6 said:

Yes. Don't forget NS&I now pay all the interest in one go in year 3 (instead of paying it to your bank each year) so you may have a tax hit.

"We calculate the interest daily and add it to your Bond on each anniversary of your investment"

Why might there be a tax hit ???

All earned interest counts towards "your taxable interest in the tax year your Bond matures" - ie all three years' interest are treated from a tax perspective as if earned at the point of maturity after three years.

Say you put in 100000. After the first year that becomes 1000130. After the second, 100260.17. After the third it becomes 100390.51 and the money is transferred to you/another account - when this happens, you have made 390.51 of taxable interest in that tax year (and none in the previous tax years).

If you also made other savings interest in that same tax year the bond matures, you could go over your personal savings allowance and therefore be liable for income tax on it.

InvesterJones

InvesterJones said:

bristolleedsfan said:

cx6 said:

Yes. Don't forget NS&I now pay all the interest in one go in year 3 (instead of paying it to your bank each year) so you may have a tax hit.

"We calculate the interest daily and add it to your Bond on each anniversary of your investment"

Why might there be a tax hit ???

All earned interest counts towards "your taxable interest in the tax year your Bond matures" - ie all three years' interest are treated from a tax perspective as if earned at the point of maturity after three years.

Say you put in 100000. After the first year that becomes 1000130. After the second, 100260.17. After the third it becomes 100390.51 and the money is transferred to you/another account - when this happens, you have made 390.51 of taxable interest in that tax year (and none in the previous tax years).

If you also made other savings interest in that same tax year the bond matures, you could go over your personal savings allowance and therefore be liable for income tax on it.

(sorry I forgot to add a point of technicality: you are liable for income tax on all your savings interest, it's just a 0 rate for the amount below the PSA I believe)

CORRECTION - I was a factor of 10 out for the interest. It's £3950.92, which is over everyone's personal tax allowance

ranciduk

Sorry guys I’m not trying to be dumb but all this pretty much goes over my head!

to simplify what I’d like to know: 1.3% interest on the amount I’m likely to put in comes to about £3000

so as a basic taxpayer - once my 3 years is up- would I not got £3000, but about £2600 instead?

see approx £3000 would just about be worthwhile- any less and I may look at different options

Thrugelmir

InvesterJones said:

bristolleedsfan said:

cx6 said:

Yes. Don't forget NS&I now pay all the interest in one go in year 3 (instead of paying it to your bank each year) so you may have a tax hit.

"We calculate the interest daily and add it to your Bond on each anniversary of your investment"

Why might there be a tax hit ???

Say you put in 100000. After the first year that becomes 1000130. After the second, 100260.17. After the third it becomes 100390.51 and the money is transferred to you/another account - when this happens, you have made 390.51 of taxable interest in that tax year (and none in the previous tax years).

Hopefully a lot more than that. Suggest you check the figures with a different calculator. . 

InvesterJones

Thrugelmir said:

InvesterJones said:

bristolleedsfan said:

cx6 said:

Yes. Don't forget NS&I now pay all the interest in one go in year 3 (instead of paying it to your bank each year) so you may have a tax hit.

"We calculate the interest daily and add it to your Bond on each anniversary of your investment"

Why might there be a tax hit ???

Say you put in 100000. After the first year that becomes 100130. After the second, 100260.17. After the third it becomes 100390.51 and the money is transferred to you/another account - when this happens, you have made 390.51 of taxable interest in that tax year (and none in the previous tax years).

Hopefully a lot more than that. Suggest you check the figures with a different calculator. . 

oops. My bad. I think I was a factor of 10 out on the interest

InvesterJones

ranciduk said:

Sorry guys I’m not trying to be dumb but all this pretty much goes over my head!

to simplify what I’d like to know: 1.3% interest on the amount I’m likely to put in comes to about £3000

so as a basic taxpayer - once my 3 years is up- would I not got £3000, but about £2600 instead?

see approx £3000 would just about be worthwhile- any less and I may look at different options

Yes you're spot on (assuming I didn't fumble the maths again).

ranciduk

Ok thanks 

InvesterJones

Another thought: it is sometimes possible to buy more than one bond, in which case you could start one this tax year and start another the next (ie in two months time) - that way the maturities fall across two tax years so you'll get the advantage of another years PSA.