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<p>At Budget 2015, the Chancellor announced that from April 6<sup>th</sup> 2016, a
new savings allowance will remove 95% of people from savings income tax. As a result
the industry is expected to switch off the Tax Deduction Scheme for Interest (TDSI),
and NS&I plan to start paying interest gross on all taxable products, including
the 65+ “Pensioner” Bond.</p><p> </p><p> </p><p> </p><p>The Bonds are not included
in TDSI as NS&I as a whole does not operate TDSI. Instead NS&I decide on a
product-by-product basis as to whether taxable products should be paid net or gross
of basic rate tax. At the time 65+ bonds were being developed, the majority of pensioners
were basic rate tax payers, and therefore liable to be taxed at the basic rate on
the interest on their savings. Paying interest net of the basic rate on 65+ bonds
meant that the majority of customers would be taxed correctly without the need to
intervene.</p><p> </p><p> </p><p> </p><p> </p><p> </p><p>When TDSI was implemented
in 1991, it was decided that it was not appropriate or cost-effective for NS&I.
The option to join was kept under review, but as 72% of NS&I’s total stock is
invested in tax-free products, and a large proportion of NS&I customers are not
liable to pay tax on the remaining taxable products, it is considered to be prohibitively
expensive to the taxpayer for NS&I to join the scheme.</p><p> </p><p> </p><p>
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