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What is a tax credit and why do I get one?

There are certain funds which predominantly hold bonds and so make interest distributions rather than dividend distributions. Interest received inside of an ISA, Junior ISA or SIPP is tax free. Previously, some bond funds made interest distributions net of 20% tax and we automatically reclaimed the 20% tax on your behalf. This resulted in a tax credit being added to your income account. Since 6 April 2017 bond funds have paid interest distributions without deducting any tax so we no longer need to reclaim this for you.

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