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HMRC internal manual

Savings and Investment Manual

Interest: exemptions: tax-free savings income

Interest that is not taxable

There are a number of specific statutory exemptions to the tax charge on interest. ITTTOIA05/S369 (3) lists these. One group of exemptions relates broadly to particular types of savings plans or vehicles, as identified in Part 6 of ITTOIA05 (‘Exempt Income’).

National Savings income

There is a long-standing exemption from tax on the first £70 of interest received by individuals in a year of assessment on ordinary accounts with the National Savings Bank, apart from investment deposits (ITTOIA05/S691). It has not been possible to open a new National Savings Bank ordinary account since 29 January 2004. The tax exemption does not apply to the Easy Access Savings Account that replaced the ordinary account.

There is also a statutory exemption for interest on UK savings certificates (ITTOIA05/S692) and Ulster savings certificates (ITTIOA05/S693).

Save As You Earn

Interest or similar sums, and any terminal bonus, payable under a certified contractual savings scheme (Save as You Earn) and arising from a deposit with the Department of National Savings or a bank, or shares in a building society, are exempt from income tax and capital gains tax (ITTOIA05/S702).

Accrued income scheme

Interest on securities taxable under the Accrued Income Scheme (AIS) is exempt where the interest is covered by accrued income losses. See SAIM4000 onwards for more details.

Individual Investment Plans

See SAIM2310.

Further information on tax exempt savings income

See SAIM1120.