Income tax - NS&I Guaranteed Growth Bonds 6.20% gross

Shfpower

Hello All, 

Please excuse my ignorance with this, but I am not sure how things work. I have been reading about the NS&I growth bond which I am keen to set up. 

As the interest with ISAs in High Street banks has been quite poor, my savings are currently outside of an ISA. Once I have the NS&A bond in place, if I go over my PSA , how does it work for income tax? Is this something I would need to declare at the end of the financial year using a declaration form? Would tax be deducted through NS&I?

Sorry for the silly question, but as you can see, I have never been in this situation before and don't really know how it works. I want to ensure that I act correctly and if I need to pay tax, that I understand what I need to do.

Many thanks for your patience and help with this!

Flugelhorn

we have always gone over the PSA with interest from NS&I - I do S/A and OH just writes a letter to them to tell them - they do say that we don't need to let them know unless it is over a specific threshold which keeps increasing every year (think it was 2.5K last year) 
Suspect far more people will be over the limit this year and HMRC could be inundated with info - hopefully HMRC will make it clear what we have to do this year

Bigwheels1111

Unless you get 10k or more from interest you do not need to inform them.

Over 10k and a self assessment return is needed.

I would get access to you tax records to make sure the right total is given to them by NS&I.

Do you earn over £12,570 per year or less than £17,570.

£12,570 tax free earnings, or interest.

£ 5,000 starter rate savings tax free

£ 1,000 PSA.

If you earn for eg £14,000, you could still get £4.570 of tax free interest.

Flugelhorn

Thanks @Bigwheels1111 so it is  10K now? that will reduce the amount of paperwork sent to HMRC. 

Albermarle

Sorry for the silly question, 
It is not a silly question but if you scroll through the forum you will see it is one that is asked very regularly.
If you read a few of these threads you will be an expert in no time.

friolento

Shfpower said:

Hello All, 

Please excuse my ignorance with this, but I am not sure how things work. I have been reading about the NS&I growth bond which I am keen to set up. 

As the interest with ISAs in High Street banks has been quite poor, my savings are currently outside of an ISA. Once I have the NS&A bond in place, if I go over my PSA , how does it work for income tax? Is this something I would need to declare at the end of the financial year using a declaration form? Would tax be deducted through NS&I?

Sorry for the silly question, but as you can see, I have never been in this situation before and don't really know how it works. I want to ensure that I act correctly and if I need to pay tax, that I understand what I need to do.

Many thanks for your patience and help with this!

If you have tax to pay on your 6.2% interest, you would do a lot better with an ISA. Any ISA that pays more than 4.96% would pay as much as the 6.2% account after 20% tax taken off. You can presently get up to 5.85% on a 1 year ISA.

£1,000 in the 6.2%: £62 minus 20% = £49.60

£1,000 in the 5.85% ISA = £58.50

Flugelhorn

depends how much it is - can only put £20k a year in an ISA

RG2015

friolento said:

Shfpower said:

Hello All, 

Please excuse my ignorance with this, but I am not sure how things work. I have been reading about the NS&I growth bond which I am keen to set up. 

As the interest with ISAs in High Street banks has been quite poor, my savings are currently outside of an ISA. Once I have the NS&A bond in place, if I go over my PSA , how does it work for income tax? Is this something I would need to declare at the end of the financial year using a declaration form? Would tax be deducted through NS&I?

Sorry for the silly question, but as you can see, I have never been in this situation before and don't really know how it works. I want to ensure that I act correctly and if I need to pay tax, that I understand what I need to do.

Many thanks for your patience and help with this!

If you have tax to pay on your 6.2% interest, you would do a lot better with an ISA. Any ISA that pays more than 4.96% would pay as much as the 6.2% account after 20% tax taken off. You can presently get up to 5.85% on a 1 year ISA.

£1,000 in the 6.2%: £62 minus 20% = £49.60

£1,000 in the 5.85% ISA = £58.50

This may not be true.

If your only savings were £16,129 the annual interest at 6.20% would be £1,000 so for a basic rate taxpayer no tax would be payable.

You also need to consider any other taxable income to determine if your total income exceeded the personal allowance of £12,570 and possibly the £5,000 starter rate for savings.

https://www.gov.uk/apply-tax-free-interest-on-savings

friolento

I should have said that I am talking about money that would generate interest in excess of £1,000. 

35har1old

Bigwheels1111 said:

Unless you get 10k or more from interest you do not need to inform them.

Over 10k and a self assessment return is needed.

I would get access to you tax records to make sure the right total is given to them by NS&I.

Do you earn over £12,570 per year or less than £17,570.

£12,570 tax free earnings, or interest.

£ 5,000 starter rate savings tax free

£ 1,000 PSA.

If you earn for eg £14,000, you could still get £4.570 of tax free interest.

Once you started self assessment you may have to continue even if it drops below £10000

Flugelhorn

35har1old said:

Bigwheels1111 said:

Unless you get 10k or more from interest you do not need to inform them.

Over 10k and a self assessment return is needed.

I would get access to you tax records to make sure the right total is given to them by NS&I.

Do you earn over £12,570 per year or less than £17,570.

£12,570 tax free earnings, or interest.

£ 5,000 starter rate savings tax free

£ 1,000 PSA.

If you earn for eg £14,000, you could still get £4.570 of tax free interest.

Once you started self assessment you may have to continue even if it drops below £10000

agree - I have done SA for years and now there is no good reason, spoke to someone on the phone about it and they supposedly set it to not needing SA but I still get reminders etc - reckon will have to keep doing it until they reject it