Guide to Tax & Money

	Liable to income tax?	Liable to CGT/	Non taxpayers	Notes
SAVINGS
Building society/bank account	Yes	No	Can register to receive interest gross of tax.	For gross interest, fill in form R85 on opening account (1). Otherwise send certificates of interest from bank to Inland Revenue for refund of any tax overpaid
NATIONAL SAVINGS
Index-linked Certificates	No	No	Tax-free	-
Fixed interest Certificates	No	No	Tax-free	-
Premium Bonds	No	No	Tax-free	-
Children's Bonus Bonds	No	No	Tax-free	-
Fixed Rate Savings Bonds	Yes	No	Can reclaim tax	Interest paid net of tax at lower rate. Statement sent by NS each year.
Pensioner's Guaranteed Bonds	Yes	No	Tax-free	Paid gross but liable to tax and must be declared
Income Bonds	Yes	No	Tax-free	Interest paid gross
Capital Bonds	Yes	No	Tax-free	Interest taxed each year but paid out only at end of 5 years
Investment account	Yes	No	Tax-free
Ordinary account	Yes	No	Tax-free	Ordinary account: First £70 a year interest is tax free.
INVESTMENTS
Unit trusts, OEICs, investment trusts, ordinary shares	Yes, on dividends or interest distributions	Yes, on price increase	No Reclaim on dividends, Can reclaim on interest.
ISAs and PEPs	No (2)	No	Tax-free
Corporate bond ISAs and PEPs	No	No	Tax-free
UK Insurance bonds ( including with-profit bonds)	Yes (3)	No	No reclaim	Many basic-rate taxpayers will not have a further tax liability.
Insurance regular savings plans (qualifying)	No	No	No reclaim	The proceeds could be subject to a tax liability if the policy is cashed in early.
Government stocks (gilts)	Yes, on interest	No	Non-taxpayers can receive gross interest.	Interest paid gross unless election to receive interest net.
PENSIONS
Personal pension contributions	-	-	-	Tax relief on contributions at highest rate(s) of tax. (4)
INCOME FROM PENSIONS
Company pension income	Yes	-	-	Paid net via tax coding.
State pension	Yes	-	-	Paid gross. Should be declared on tax return and tax paid where due. (possibly by tax code adjustment)
INCOME FROM ANNUITIES
Pension annuity (5)	Whole income is taxed	-	Can reclaim tax.	Normally paid net of tax.
Non-pension annuity (6)	Taxable interest element of annuity taxed	-	Can reclaim tax.	Capital element (notified on purchase) is not taxed. Interest element taxed at 20% (basic rate taxpayers) or 40% (higher rate taxpayers).
PRIZE WINNINGS
Lottery wins	No	No	Tax-free	Most competitions/awards free of tax except where employment related.

NOTES
1. Form R85 should only be completed if other income plus gross building society/bank interest is less than your personal allowance.	4. Non-taxpayers who are eligible to make contributions can obtain tax relief at an effective rate of 22% on net annual contributions of up to £2,808.
2. 10% tax is paid on UK dividends within the scheme but can be reclaimed by the ISA manager until 5 April 2004.	5. Annuity bought with personal pension fund (known as a compulsory purchase annuity).
3. Tax credit paid within the fund equal to basic rate (22%) tax for tax year 2003/04, reducing to 20% from 6 April 2004. Further income tax payable on gains arising on encashment of bond (chargeable event gains) if policyholder is a higher rate taxpayer.	6. Annuity bought with other savings (known as a purchased life annuity).
Article date January 2004