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Can inflation bond pay without deducting tax?

Saving | Savings Accounts Helpful? 1

Asked by webwiz, submitted 26 March 2011.

Open Quote You rate the BM Savings 5 Year Inflation Rate Bond (2) highly except that it is taxable. Can a non tax payer get the return without paying tax, either by completing an R85 or getting a refund via a tax return?End Quote

Answered by Justin on 28 March 2011

Yes, non-taxpayers can enjoy gross returns as the interest is treated just like a conventional savings account. As you highlight, non-taxpayers can receive interest without deduction of tax by completing form R85, or reclaim any interest deducted via their tax return or using the HMRC R40 tax repayment form.

I rate the bond highly for its type, but as mentioned in the review there's not a clear cut case for linking savings returns to inflation over the next 5 years - a good fixed rate account might generate higher returns if inflation falls back.


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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Comment by webwiz at 5:40pm on 28 Mar 2011:

Thanks Justin. A pity that BM could not find room on teir site to make this clear.