The team at MoneySavingExpert have spotted a quirk with the way the new NSandI savings accounts work, which can help you legally avoid paying tax on savings interest
Martin Lewis' Money Saving Expert team has revealed a clever way to legally avoid tax using an NSandI Premium Bonds account. NSandI, the organisation that operates Premium Bonds in the UK, has introduced a new savings account offering fixed term bonds for two or five years, with interest rates of 4.6 or 4.1 percent.
While these may not be the best rates currently available, there is a unique feature of these accounts that can help you legally avoid paying tax on savings interest. The Personal Allowance allows you to earn £1,000 of interest on savings before you start paying tax on it, or £500 if you're a higher rate taxpayer.
However, with an NSandI savings account, you could arrange your finances in such a way as to minimise or even eliminate your tax liability because you can choose when the savings interest is paid. Martin Lewis' MSE team explained: "You can choose when and where to have the interest paid. "The Guaranteed Income Bonds pay interest monthly directly into your linked current account, while the Guaranteed Growth Bonds pay interest annually into the bond itself meaning you can only access the interest when your bond matures."
They added: "This is important if you need to pay tax on savings interest, as it's when you can access your interest that counts for tax purposes. Unlike NSandI's Premium Bonds, where any prizes you win are tax-free, interest you earn from British Savings Bonds IS taxable.", reports the Express.
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