Investment income is taxed at 20% unless your total income for the year enters the 40% band. Then a further 20% is payable on any income in that band from which 20% has been deducted at source.

if total income for the year is below the 20% band, investment income is taxed at 10% and if it is below the lo% band it is is tax free. Tax deducted at source at 20% can be recovered.

Tax is deducted from bank and building society interest at the rate of 20% before it is paid, unless recipients have completed a form (obtainable from the bank or building society) saying that their total income is below their total allowances.

Dividends on shares are treated as having been taxed at source at 10% (this is sometimes called the dividend tax credit). It cannot be avoided and cannot be recovered by a non taxpayer. Higher rate taxpayers must pay a further 32.5%.

Investments can be transferred between spouses to take advantage of one having lower income tax rates than the other, without incurring capital gains or inheritance tax liabilities, or stamp duty.

Investments free of income tax

Income from the following investments is free of tax:

• National Savings certificates, children's bonus bonds and premium bonds
• ISAs and PEPs
• TESSAs (till maturity)
• friendly society savings schemes
• venture capital trusts
• commercial forestry

Tax relief on amount invested

There are also certain investments which earn income tax relief on the amount invested. The relief would be at your highest tax rate. They are:

pension scheme contributions within Inland Revenue limits new enterprise investment schemes and venture capital trusts.

----
If you need to borrow money, http://www.homeloansonline.org.uk provides a quick and easy application form. Get all the options clearly explained to you and then choose. Ideal for people looking for a fast secured loan