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HMRC internal manual

Savings and Investment Manual

Savings and investment income: what is in the Savings and Investment Manual

What is in the SAIM

The Savings and Investment Manual (“SAIM”) explains the taxation of various types of savings and investment income of individuals and trusts, other than that received in the course of a trade.

The income dealt with in SAIM covers

  • interest and other types of return received on cash deposits in bank and building society accounts, Government securities, and corporate bonds;
  • dividends and other distributions received on shares and other types of equity holdings in a company, including amounts received by investors in UK Real Estate Investment Trusts (UK REITs - but see the REIT Manual for the taxation of the REIT itself);
  • amounts that may be taxed as income although they may appear to be in the nature of a capital return
  • amounts received by members of collective investment schemes such as unit trusts;
  • ‘annual payments’.

The layout of the SAIM

The tax rules governing the most common type of investment income, namely interest, are in SAIM2000.

Some investments in securities give an interest-like return in the form of a discount. These are known as ‘deeply discounted securities’. See SAIM3000.

Special rules ensure that accrued amounts on certain securities are taxed as interest and not as capital gains. This is the Accrued Income Scheme. See SAIM4000.

The tax rules on the dividends and other distributions from companies are set out in SAIM5000.

Equity investments in companies are often held in the form of collective investment schemes. The tax rules affecting investors in such schemes are explained in SAIM6000.

Certain types of derivative products can be used to provide a return that is essentially the same as interest. SAIM7000 explains the tax rules that ensure that such a return is taxed as income.

SAIM8000 explains the tax rules on ‘annual payments’.

Deduction of tax

Deduction of tax is commonly applied to income received from savings and investments. SAIM9000 explains this in more detail. The legislation on deduction of tax applies to all types of taxpayer and, where relevant, the application of these rules to companies is also covered.

Interest relief

Chapter 1 of Part 8 of the Income Tax Act 2007 provides for tax relief to be given to an individual who pays interest on certain loans. The rules relating to this relief are explained in SAIM10000.

Transfers of income streams

Where the right to an income stream is transferred, the value of the transferred income stream is treated as income of the transferor. Chapter 5A of the Income Tax Act 2007 has the rules for non-corporate transferors. These are outlined in SAIM11000.