Additional income and benefits - Tax free Interest

Some National Savings products offer interest or gains which are completely free of tax. These are different from investments in building societies and banks, which pay interest to you as if the basic rate tax had been paid.

On the latter investments, higher rates of tax still have to be paid if you are liable for them and the 'grossed-up' value can affect your age allowance. Neither of those problems arises with National Savings investments.

However, because they are free of tax, the rates of interest paid on these investments are lower than for other National Savings investments. They are all ideal for retired taxpayers, especially those who pay the higher rate of tax or whose income is just above £10,600.

More information

Savings if you have any - Savings Certificates

You can invest between 2890 and 10000 in the current issue of savings certificates (the 66rd, though this may have been withdrawn by the time this website is published). As the investment market changes, the state withdraws one issue of certificates from sale and introduces another. But the same principle applies to them all. Your investment grows each year and the growth is re-invested. At the end of five years you can cash the whole investment. The maximum 1000 invested in the 66rd issue will be worth 1808.9 9 after five years, which is equivalent to an interest rate of 7%. If you are buying the certificates by cashing in earlier certificates, you can invest more.
If you cash in the certificates early, you get a lower rate . . . ... see: Savings if you have any - Savings Certificates