Why did I have to pay tax on my £10,000 savings bond? TONY HETHERINGTON replies

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Mrs I. T. writes: Last year I put £10,000 into a 65+ Guaranteed Growth Bond from National Savings & Investments and declared at the time that I was a non-taxpayer. 

In April this year, I was told my bond had earned £410, but tax of £80 had been deducted. When I rang NS&I to complain, I was told to claim the money back from Revenue & Customs, which I did. 

But why was the tax deducted when I had declared I was not a taxpayer?

'I was told my bond had earned £410, but tax of £80 had been deducted'

I suspect the explanation for all this lies in the new tax-free personal savings allowance, which was announced by the then Chancellor George Osborne in March last year, but did not take effect until April of this year.

When your bond was launched, interest was taxable and NS&I deducted tax at the basic rate.

The booklet that accompanied the investment form explained that interest would be paid net of tax. 

NS&I was not part of the scheme under which banks and building societies could pay interest in full to non-taxpayers.

This year, the rules are different. The new allowance means interest is paid in full, with no deductions. You then declare it on your tax return.

Basic rate taxpayers are allowed a total of £1,000 without paying tax. Higher rate taxpayers are allowed £500 while top rate taxpayers have no exempt band.