(NS&I) National Savings & Investments - Guaranteed Income Bonds

Dear HMRC Admins, Thank you once again for your time and effort in handling our queries. Last year, the UK's state-owned savings bank NS&I re-opened sale of its Guaranteed Income Bonds to its customers. Launched on 30 August 2023, the bond offered 6.20% gross/AER gross interest, payable monthly with no tax deducted. The understanding is that such interest is taxable (and covered by PSA). The question is : When filling in the self assessment forms, where should the interest be declared? Should it be declared in "Untaxed UK interest" in Box 2, TR3, SA100 (together with interests generated from other bank accounts such as the Direct Saver account offered by NS&I)? Or should it be declared in Box 3 of the Additional Information page Ai1 of SA101? Or perhaps anywhere else in the SA forms? Thanks so much for guiding us.

Hi,

The guidance below advises that certain types of income from NS&I are exempt.

SAIM1120 - Savings and investment income: tax exempt savings

If the type of interest you have from NS&I is taxable, it would be declared in box 2 for untaxed interest.  

If it is not taxable, it should not be declared on the tax return.

Thank you.

Dear HMRC Admin, Thank you very much for your reply. The interest is taxable, according to NS&I. I assume then that they should be declared as "Untaxed UK interest" in Box 2, TR3, SA100. However, does it matter that NS&I calls the product a "bond"? I read that the interests from Government Gilt should be declared as "other UK Income" in Box 3 of the Additional Information page Ai1 of SA101, rather than in SA100. Just a bit confused about this "Guaranteed Income Bond" from NS&I. Granted, it seems there would not be any difference in tax calculation whether it is declared in SA100 or SA101. Just want to get things right. There is another associated question. A person who is registered for self-assessment need to file a capital gains summary if "the total amount you sold the assets for was more than 4 times your allowance" (https://www.gov.uk/capital-gains-tax/work-out-need-to-pay). My understanding is that the value of all disposals of chargeable assets have to be included in calculating whether the "4 times" limit has been exceeded. "The repayment of the debt is a disposal of the asset by the creditor for capital gains purposes ... Although all debts are assets, some debts do not give rise to chargeable gains on their disposal. For example, debts held by the original creditor will not normally give rise to chargeable gains, unless they are debts on a security." (CG12200). I am given to understand that this is why bank deposits are normally excluded from the calculation. Does the same principle apply to the repayment of the "Guaranteed Income Bond" by NS&I at the end of the fixed term? (P.S. Under the Guaranteed Income Bond, a customer deposits a fixed sum of money in GBP with NS&I for a fixed term, during which NS&I pays monthly interest, taxable, to the customer at the agreed fixed rate. At the end of the term, NS&I repays the customer the original deposit amount in full, in GBP. Hence, there will be no chargeable gains in any event. The question relates to whether such repayment has to be included in calculating the 4 times limit.). Would such repayment give rise to a disposal of a chargeable asset for the purpose of calculating the 4 times limit? Thanks again for considering the question. I hope I am not overthinking and making the situation more complicated than it actually is.

Hi user888,
Bank interest falls under income tax legislation, as does NS&I bonds, so are taxed as income, not capital gains.
Up to 5 April 2023, the criteria for declaring capital gains in a tax return, was £49200 (4 times the annual exempt allowance) disposal value.
For 2023 to 2024 onwards, this was changed to £50000.00.
If a tax return is required for any other reason and the assets disposed of exceed £50000 in value, then the gains are required to be reported in a Self Assessment tax return.
Please have a look at the guidance notes for SA101 (additonal information) as NS&I income bonds should be declared here:
Additional information notes
Thank you. 
 

Dear HMRC admin, Thank you very much again for the quick response. Just need to make sure I understand the replies correctly regarding the NS&I bonds being taxed as income and not capital gains. In respect of a person who is already registered for self assessment in a tax year, and who has a NS&I Guaranteed Income Bond maturing during the tax year, are the following positions correct? 1. The interests generated by the NS&I bond and received during the tax year should be declared in SA101 (additional information). 2. There is no need to include the value of the maturing NS&I bond for the purpose of calculating whether the disposal value of £49,200 or £50,000 is exceeded for the purpose of capital gains tax. 3. The treatment of NS&I bonds in 2 above (i.e. no need to include in calculating whether the £49,200/£50,000 limit is exceeded) is therefore the same as the treatment of other fixed terms deposits / savings bonds offered by banks, some of which are called "fixed rate bonds" by the banks. Thank you indeed.

Hi,

Please see the tax return guidance notes, page TRG5 under UK interest, for information on NS&I bonds.  

How to fill in your tax return

As this has absolutely nothing to do with capital gains, the rules on declaring capital gains in a tax return are not relevant.  Please ignore the capaital gains figures £49200 and £50000, as they are not relevant here.

Thank you.

Dear HMRC Admin team, Thank you ever so much for all your replies and for clarifying the issue. Very much appreciated indeed. I am so glad that we have you all here to assist us in going through our confusing tax reporting journeys. Cheers.