For over 150 years, National Savings and Investments has looked after billions of pounds of savings and investments. Over 25 million people save with NS&I and one of the main reasons that the investments are so popular is that many of them offer tax advantages.
We look at the ways that you can save tax by investing with National Savings. Keep reading to learn more.
52 Ways to Save Tax – Part 21: Use National Savings and Investments
National Savings and Investments (NS&I) are backed by HM Treasury. This means that all the money you invest is always 100% secure. While NS&I is not a bank, they offer a range of savings and investment products, some of which offer excellent tax benefits.
If you have between £100 and £50,000 to invest then you could consider the tax advantages of Premium Bonds.
Premium Bonds don’t pay interest, but every month your Bonds are entered into a prize draw with the chance of winning a £1 million jackpot and lots of other tax-free prizes. Any prize that you win on your Premium Bonds is tax free, meaning you won’t pay any tax on the returns from your investment – if you win.
Anyone aged 16 or over can buy Bonds and parents, legal guardians and (great) grandparents can invest on behalf of their child or grandchild aged under 16.
Premium Bonds are great if you want to earn tax-free interest. Your money is completely secure and you can cash in your Bonds at any time without penalty. Bear in mind that the returns are determined by a prize draw and so you could invest for years without ever winning a prize.
A cash Individual Savings Account (ISA) lets you earn tax-free interest with no risk to your capital. NS&I offer a Direct ISA which can be managed online or by telephone and offers a tax-free savings rate.
You can invest up to your annual ISA limit (£15,240 in the tax year 2015/16) and you can access your money whenever you need to. All returns are free of income tax.
From time to time, NS&I also offer tax-efficient Index-Linked Certificates. These products are sometimes generally available although often they will be restricted to savers who have existing Certificates that are maturing.
Index-Linked Certificates offer a return in line with inflation, using the Retail Prices Index (RPI). The Certificates often offer a return slightly above the rate of inflation.
The returns from Index-Linked Certificates are tax free, meaning that any interest and index-linking are exempt from UK income and Capital Gains Tax.