Which NS&I Tax Free Bond

6022tivo

Hi Guys

Have £30 I need to get tax free today.

Have the new issue bonds to look at.

2Yr Fixed at 2.6%
5Yr Fixed at 2.7%

3Yr Index + 0.25%
5Yr Index + 0.35%


All pretty crap to be honest, but will have to probably be the Index linked????

Any Advice appreciated.

Biggles

You should only consider these after you have topped up your ISA.

Er, did you mean £30 or £30k??

Jonbvn

The index linked are a reasonable bet ATM, since inflation is on the rise, and BoE rate looks set to drop. Note that they use RPI and not CPI for the index linking.

dunstonh

£30 is probably better in a cash ISA as its less the minimum allowed for certs.

6022tivo

lol, i did mean 30k

due to tax credits need to lose it in something tax free. cash part of isa is used up, not too sure about the share element for this year at the moment.

dunstonh

if you mean children/working tax credits then you could consider a pension. Pension contributions lower your income and not only give you tax relief but will increase the amount of tax credits you are paid. This can in best scenario give upto an effective equivalent of up to 72% tax relief (which ignoring growth and taking back 25% back on commencement means your retirement income has only cost you 3%).

ISAs and NS&I certs have no impact on tax credits though so if you are using them for that reason you will see no benefit. Or do you mean some other type of benefit, allowance or credit?

6022tivo

As I understand it, you have to declare income from taxable savings over £300 PA as income on your tax credit forms (It is child family tax credit), as the income from my ISA and NS&I certs are tax free, this does not have to be declared?.

If it was taxable interest over £300 over the year, this would have to be declared and would impact the amounts received. This is the only benifit I claim.

I already have a company pension, but have just brought a smaller house so the cash difference is the money I am talking about.
Currently it is in a standard savings account gaining taxable interest that needs to be declared as income as it is now over £300 in the tax year, in the certs it will be gaining tax free income which I assume does not have to be declared?

Jonbvn

dunstonh wrote: »

ISAs and NS&I certs have no impact on tax credits though so if you are using them for that reason you will see no benefit. Or do you mean some other type of benefit, allowance or credit?

Sorry, but the above is incorrect.

Directly from the WTC form on the HMRC website:

Q: What income will I have to report in my claim?

A: We take the following types of income into account when we work out how much tax credits to pay (amongst several others):
Most income from savings and investments (for instance, interest from bank and building society accounts, dividends from UK companies, payments from trusts or the estate of a deceased person in administration) - but not income from certain tax-exempt investments, such as, Individual Savings Accounts (ISAs), Personal Equity Plans (PEPs) or non-taxable National Savings products.

I would comment that it does seem strange, since it would be possible for someone to have millions in ISA's and NS&I products (accumulated over a few years) and still claim WTC????

dunstonh

Yes. You are correct. I was thinking capital rather than the interest earned. As in getting rid of 30k would have no impact on tax credits (whereas the interest/income distributions would).

The pension not only takes the interest/income out of equation but also lowers your employed/self employed income so you get a double gain. Nowadays, tax credit enhancement is probably one of the biggest positive points for a pension (not too many left) but most are not aware of it.

6022tivo

dunstonh wrote: »

Yes. You are correct. I was thinking capital rather than the interest earned. As in getting rid of 30k would have no impact on tax credits (whereas the interest/income distributions would).

The pension not only takes the interest/income out of equation but also lowers your employed/self employed income so you get a double gain. Nowadays, tax credit enhancement is probably one of the biggest positive points for a pension (not too many left) but most are not aware of it.

Help me out on this one, as you do have my interest.
If I increase my pension contributions with work, you are saying this may have an effect on my tax credit claim?

As I understand it, I have to input my gross company income figure onto the tax credit forms, and in my case this stays the same regardless of my pension contribution.

Jonbvn

6022tivo wrote: »

Help me out on this one, as you do have my interest.
If I increase my pension contributions with work, you are saying this may have an effect on my tax credit claim?

As I understand it, I have to input my gross company income figure onto the tax credit forms, and in my case this stays the same regardless of my pension contribution.

No it is your income after deducting pensions contributions.

From the WTC form on HMRC wesbite - suggest you d/l a copy ASAP!

However, contributions to any HM Revenue & Customs registered pension scheme (such as an occupational pension scheme, a personal pension plan or retirement annuity) and payments under the Gift Aid or Payroll Giving schemes should be deducted when you work out your income for a tax credit claim.

In short, increasing your pension contributions is an excellent idea when claiming WTC.