diff --git a/app/notifications/process_notifications.py b/app/notifications/process_notifications.py
index 6483ac766..8fc2f15f6 100644
--- a/app/notifications/process_notifications.py
+++ b/app/notifications/process_notifications.py
@@ -23,7 +23,8 @@ from app.models import (
     LETTER_TYPE,
     NOTIFICATION_CREATED,
     Notification,
-    ScheduledNotification
+    ScheduledNotification,
+    CHOOSE_POSTAGE
 )
 from app.dao.notifications_dao import (
     dao_create_notification,
@@ -31,6 +32,8 @@ from app.dao.notifications_dao import (
     dao_created_scheduled_notification
 )
 
+from app.dao.templates_dao import dao_get_template_by_id
+
 from app.v2.errors import BadRequestError
 from app.utils import (
     cache_key_for_service_template_counter,
@@ -109,7 +112,11 @@ def persist_notification(
     elif notification_type == EMAIL_TYPE:
         notification.normalised_to = format_email_address(notification.to)
     elif notification_type == LETTER_TYPE:
-        notification.postage = service.postage
+        template = dao_get_template_by_id(template_id, template_version)
+        if service.has_permission(CHOOSE_POSTAGE) and template.postage:
+            notification.postage = template.postage
+        else:
+            notification.postage = service.postage
 
     # if simulated create a Notification model to return but do not persist the Notification to the dB
     if not simulated:
diff --git a/app/template/rest.py b/app/template/rest.py
index 8cbb4125f..79b1d7d8b 100644
--- a/app/template/rest.py
+++ b/app/template/rest.py
@@ -31,7 +31,7 @@ from app.errors import (
     InvalidRequest
 )
 from app.letters.utils import get_letter_pdf
-from app.models import SMS_TYPE, Template
+from app.models import SMS_TYPE, Template, CHOOSE_POSTAGE
 from app.notifications.validators import service_has_permission, check_reply_to
 from app.schema_validation import validate
 from app.schemas import (template_schema, template_history_schema)
@@ -78,6 +78,12 @@ def create_template(service_id):
         errors = {'template_type': [message]}
         raise InvalidRequest(errors, 403)
 
+    if new_template.postage:
+        if not service_has_permission(CHOOSE_POSTAGE, fetched_service.permissions):
+            message = "Setting postage on templates is not enabled for this service."
+            errors = {'template_postage': [message]}
+            raise InvalidRequest(errors, 403)
+
     new_template.service = fetched_service
 
     over_limit = _content_count_greater_than_limit(new_template.content, new_template.template_type)
@@ -110,6 +116,12 @@ def update_template(service_id, template_id):
     if data.get('redact_personalisation') is True:
         return redact_template(fetched_template, data)
 
+    if data.get('postage'):
+        if not service_has_permission(CHOOSE_POSTAGE, fetched_template.service.permissions):
+            message = "Setting postage on templates is not enabled for this service."
+            errors = {'template_postage': [message]}
+            raise InvalidRequest(errors, 403)
+
     if "reply_to" in data:
         check_reply_to(service_id, data.get("reply_to"), fetched_template.template_type)
         updated = dao_update_template_reply_to(template_id=template_id, reply_to=data.get("reply_to"))
@@ -191,7 +203,7 @@ def get_template_versions(service_id, template_id):
 def _template_has_not_changed(current_data, updated_template):
     return all(
         current_data[key] == updated_template[key]
-        for key in ('name', 'content', 'subject', 'archived', 'process_type')
+        for key in ('name', 'content', 'subject', 'archived', 'process_type', 'postage')
     )
 
 
diff --git a/app/template/template_schemas.py b/app/template/template_schemas.py
index f63ad4575..9f38262a5 100644
--- a/app/template/template_schemas.py
+++ b/app/template/template_schemas.py
@@ -17,7 +17,8 @@ post_create_template_schema = {
         "content": {"type": "string"},
         "subject": {"type": "string"},
         "created_by": uuid,
-        "parent_folder_id": uuid
+        "parent_folder_id": uuid,
+        "postage": {"type": "string"},
     },
     "if": {
         "properties": {
diff --git a/app/v2/template/template_schemas.py b/app/v2/template/template_schemas.py
index b1b1f4820..ebd0b8342 100644
--- a/app/v2/template/template_schemas.py
+++ b/app/v2/template/template_schemas.py
@@ -37,6 +37,7 @@ get_template_by_id_response = {
         "body": {"type": "string"},
         "subject": {"type": ["string", "null"]},
         "name": {"type": "string"},
+        "postage": {"type": "string"}
     },
     "required": ["id", "type", "created_at", "updated_at", "version", "created_by", "body", "name"],
 }
@@ -63,7 +64,8 @@ post_template_preview_response = {
         "type": {"enum": TEMPLATE_TYPES},
         "version": {"type": "integer"},
         "body": {"type": "string"},
-        "subject": {"type": ["string", "null"]}
+        "subject": {"type": ["string", "null"]},
+        "postage": {"type": "string"}
     },
     "required": ["id", "type", "version", "body"]
 }
@@ -77,5 +79,6 @@ def create_post_template_preview_response(template, template_object):
         "type": template.template_type,
         "version": template.version,
         "body": str(template_object),
-        "subject": subject
+        "subject": subject,
+        "postage": template.postage
     }
diff --git a/tests/app/conftest.py b/tests/app/conftest.py
index 15f76846f..6b04e83fe 100644
--- a/tests/app/conftest.py
+++ b/tests/app/conftest.py
@@ -158,6 +158,7 @@ def sample_service(
     email_from=None,
     permissions=None,
     research_mode=None,
+    postage="second",
 ):
     if user is None:
         user = create_user()
@@ -170,6 +171,7 @@ def sample_service(
         'restricted': restricted,
         'email_from': email_from,
         'created_by': user,
+        "postage": postage,
     }
     service = Service.query.filter_by(name=service_name).first()
     if not service:
diff --git a/tests/app/dao/test_templates_dao.py b/tests/app/dao/test_templates_dao.py
index d86cec7a0..cbe6c6b72 100644
--- a/tests/app/dao/test_templates_dao.py
+++ b/tests/app/dao/test_templates_dao.py
@@ -153,7 +153,7 @@ def test_dao_update_template_reply_to_none_to_some(sample_service, sample_user):
     assert template_history.updated_at == updated.updated_at
 
 
-def test_dao_update_tempalte_reply_to_some_to_some(sample_service, sample_user):
+def test_dao_update_template_reply_to_some_to_some(sample_service, sample_user):
     letter_contact = create_letter_contact(sample_service, 'Edinburgh, ED1 1AA')
     letter_contact_2 = create_letter_contact(sample_service, 'London, N1 1DE')
 
diff --git a/tests/app/db.py b/tests/app/db.py
index 94d6ac287..02a2df85c 100644
--- a/tests/app/db.py
+++ b/tests/app/db.py
@@ -81,6 +81,7 @@ def create_service(
         prefix_sms=True,
         message_limit=1000,
         organisation_type='central',
+        postage='second'
 ):
     service = Service(
         name=service_name,
@@ -90,6 +91,7 @@ def create_service(
         created_by=user or create_user(email='{}@digital.cabinet-office.gov.uk'.format(uuid.uuid4())),
         prefix_sms=prefix_sms,
         organisation_type=organisation_type,
+        postage=postage
     )
 
     dao_create_service(service, service.created_by, service_id, service_permissions=service_permissions)
@@ -140,6 +142,7 @@ def create_template(
         hidden=False,
         archived=False,
         folder=None,
+        postage=None,
 ):
     data = {
         'name': template_name or '{} Template Name'.format(template_type),
@@ -150,6 +153,7 @@ def create_template(
         'reply_to': reply_to,
         'hidden': hidden,
         'folder': folder,
+        'postage': postage,
     }
     if template_type != SMS_TYPE:
         data['subject'] = subject
diff --git a/tests/app/notifications/test_process_notification.py b/tests/app/notifications/test_process_notification.py
index 609a863d8..192644bde 100644
--- a/tests/app/notifications/test_process_notification.py
+++ b/tests/app/notifications/test_process_notification.py
@@ -13,7 +13,9 @@ from app.models import (
     Notification,
     NotificationHistory,
     ScheduledNotification,
-    Template
+    Template,
+    LETTER_TYPE,
+    CHOOSE_POSTAGE
 )
 from app.notifications.process_notifications import (
     create_content_for_notification,
@@ -27,6 +29,8 @@ from app.utils import cache_key_for_service_template_counter
 from app.v2.errors import BadRequestError
 from tests.app.conftest import sample_api_key as create_api_key
 
+from tests.app.db import create_service, create_template
+
 
 def test_create_content_for_notification_passes(sample_email_template):
     template = Template.query.get(sample_email_template.id)
@@ -477,6 +481,41 @@ def test_persist_email_notification_stores_normalised_email(
     assert persisted_notification.normalised_to == expected_recipient_normalised
 
 
+@pytest.mark.parametrize(
+    "service_permissions, template_postage, expected_postage",
+    [
+        ([LETTER_TYPE], "first", "second"),
+        ([LETTER_TYPE, CHOOSE_POSTAGE], "first", "first"),
+        ([LETTER_TYPE, CHOOSE_POSTAGE], None, "second"),
+    ]
+)
+def test_persist_letter_notification_finds_correct_postage(
+    mocker,
+    notify_db,
+    notify_db_session,
+    service_permissions,
+    template_postage,
+    expected_postage
+):
+    service = create_service(service_permissions=service_permissions, postage="second")
+    api_key = create_api_key(notify_db, notify_db_session, service=service)
+    template = create_template(service, template_type=LETTER_TYPE, postage=template_postage)
+    mocker.patch('app.dao.templates_dao.dao_get_template_by_id', return_value=template)
+    persist_notification(
+        template_id=template.id,
+        template_version=template.version,
+        recipient="Jane Doe, 10 Downing Street, London",
+        service=service,
+        personalisation=None,
+        notification_type=LETTER_TYPE,
+        api_key_id=api_key.id,
+        key_type=api_key.key_type,
+    )
+    persisted_notification = Notification.query.all()[0]
+
+    assert persisted_notification.postage == expected_postage
+
+
 @pytest.mark.parametrize('utc_time, day_in_key', [
     ('2016-01-01 23:00:00', '2016-01-01'),
     ('2016-06-01 22:59:00', '2016-06-01'),
diff --git a/tests/app/template/test_rest.py b/tests/app/template/test_rest.py
index 7cf46aa80..64c51becc 100644
--- a/tests/app/template/test_rest.py
+++ b/tests/app/template/test_rest.py
@@ -18,7 +18,8 @@ from app.models import (
     LETTER_TYPE,
     SMS_TYPE,
     Template,
-    TemplateHistory
+    TemplateHistory,
+    CHOOSE_POSTAGE
 )
 from app.dao.templates_dao import dao_get_template_by_id, dao_redact_template
 
@@ -43,7 +44,7 @@ from tests.conftest import set_config_values
 def test_should_create_a_new_template_for_a_service(
     client, sample_user, template_type, subject
 ):
-    service = create_service(service_permissions=[template_type])
+    service = create_service(service_permissions=[template_type, CHOOSE_POSTAGE])
     data = {
         'name': 'my template',
         'template_type': template_type,
@@ -53,6 +54,8 @@ def test_should_create_a_new_template_for_a_service(
     }
     if subject:
         data.update({'subject': subject})
+    if template_type == LETTER_TYPE:
+        data.update({'postage': 'first'})
     data = json.dumps(data)
     auth_header = create_authorization_header()
 
@@ -76,6 +79,11 @@ def test_should_create_a_new_template_for_a_service(
     else:
         assert not json_resp['data']['subject']
 
+    if template_type == LETTER_TYPE:
+        assert json_resp['data']['postage'] == 'first'
+    else:
+        assert not json_resp['data']['postage']
+
     template = Template.query.get(json_resp['data']['id'])
     from app.schemas import template_schema
     assert sorted(json_resp['data']) == sorted(template_schema.dump(template).data)
@@ -210,6 +218,34 @@ def test_should_raise_error_on_create_if_no_permission(
     assert json_resp['message'] == expected_error
 
 
+def test_should_raise_error_on_create_if_no_choose_postage_permission(client, sample_user):
+    service = create_service(service_permissions=[LETTER_TYPE])
+    data = {
+        'name': 'my template',
+        'template_type': LETTER_TYPE,
+        'content': 'template content',
+        'service': str(service.id),
+        'created_by': str(sample_user.id),
+        'subject': "Some letter",
+        'postage': 'first',
+    }
+
+    data = json.dumps(data)
+    auth_header = create_authorization_header()
+
+    response = client.post(
+        '/service/{}/template'.format(service.id),
+        headers=[('Content-Type', 'application/json'), auth_header],
+        data=data
+    )
+    json_resp = json.loads(response.get_data(as_text=True))
+    assert response.status_code == 403
+    assert json_resp['result'] == 'error'
+    assert json_resp['message'] == {
+        "template_postage": ["Setting postage on templates is not enabled for this service."]
+    }
+
+
 @pytest.mark.parametrize('template_factory, expected_error', [
     (sample_template_without_sms_permission, {'template_type': ['Updating text message templates is not allowed']}),
     (sample_template_without_email_permission, {'template_type': ['Updating email templates is not allowed']}),
@@ -239,6 +275,33 @@ def test_should_be_error_on_update_if_no_permission(
     assert json_resp['message'] == expected_error
 
 
+def test_should_be_error_on_update_if_no_choose_postage_permission(client, sample_user):
+    service = create_service(service_name='some_service', service_permissions=[LETTER_TYPE])
+    template = create_template(service, template_type=LETTER_TYPE)
+    data = {
+        'content': 'new template content',
+        'created_by': str(sample_user.id),
+        'postage': 'first'
+    }
+
+    data = json.dumps(data)
+    auth_header = create_authorization_header()
+
+    update_response = client.post(
+        '/service/{}/template/{}'.format(
+            template.service_id, template.id),
+        headers=[('Content-Type', 'application/json'), auth_header],
+        data=data
+    )
+
+    json_resp = json.loads(update_response.get_data(as_text=True))
+    assert update_response.status_code == 403
+    assert json_resp['result'] == 'error'
+    assert json_resp['message'] == {
+        "template_postage": ["Setting postage on templates is not enabled for this service."]
+    }
+
+
 def test_should_error_if_created_by_missing(client, sample_user, sample_service):
     service_id = str(sample_service.id)
     data = {
@@ -301,16 +364,19 @@ def test_must_have_a_subject_on_an_email_or_letter_template(client, sample_user,
     assert json_resp['errors'][0]["message"] == 'subject is a required property'
 
 
-def test_update_should_update_a_template(client, sample_user, sample_template):
+def test_update_should_update_a_template(client, sample_user):
+    service = create_service(service_permissions=[LETTER_TYPE, CHOOSE_POSTAGE])
+    template = create_template(service, template_type="letter", postage="second")
     data = {
-        'content': 'my template has new content <script type="text/javascript">alert("foo")</script>',
-        'created_by': str(sample_user.id)
+        'content': 'my template has new content, swell!',
+        'created_by': str(sample_user.id),
+        'postage': 'first'
     }
     data = json.dumps(data)
     auth_header = create_authorization_header()
 
     update_response = client.post(
-        '/service/{}/template/{}'.format(sample_template.service_id, sample_template.id),
+        '/service/{}/template/{}'.format(service.id, template.id),
         headers=[('Content-Type', 'application/json'), auth_header],
         data=data
     )
@@ -318,10 +384,11 @@ def test_update_should_update_a_template(client, sample_user, sample_template):
     assert update_response.status_code == 200
     update_json_resp = json.loads(update_response.get_data(as_text=True))
     assert update_json_resp['data']['content'] == (
-        'my template has new content <script type="text/javascript">alert("foo")</script>'
+        'my template has new content, swell!'
     )
-    assert update_json_resp['data']['name'] == sample_template.name
-    assert update_json_resp['data']['template_type'] == sample_template.template_type
+    assert update_json_resp['data']['postage'] == 'first'
+    assert update_json_resp['data']['name'] == template.name
+    assert update_json_resp['data']['template_type'] == template.template_type
     assert update_json_resp['data']['version'] == 2
 
 
diff --git a/tests/app/v2/notifications/test_post_letter_notifications.py b/tests/app/v2/notifications/test_post_letter_notifications.py
index 4b42af6dc..734928088 100644
--- a/tests/app/v2/notifications/test_post_letter_notifications.py
+++ b/tests/app/v2/notifications/test_post_letter_notifications.py
@@ -20,6 +20,7 @@ from app.models import (
     NOTIFICATION_DELIVERED,
     NOTIFICATION_PENDING_VIRUS_CHECK,
     SMS_TYPE,
+    CHOOSE_POSTAGE
 )
 from app.schema_validation import validate
 from app.v2.errors import RateLimitError
@@ -95,12 +96,23 @@ def test_post_letter_notification_returns_201(client, sample_letter_template, mo
     mock.assert_called_once_with([str(notification.id)], queue=QueueNames.CREATE_LETTERS_PDF)
 
 
-@pytest.mark.parametrize('postage', ['first', 'second'])
-def test_post_letter_notification_sets_postage(client, sample_letter_template, mocker, postage):
-    sample_letter_template.service.postage = postage
+@pytest.mark.parametrize('service_permissions, service_postage, template_postage, expected_postage', [
+    ([LETTER_TYPE], "second", "first", "second"),
+    ([LETTER_TYPE], "first", "second", "first"),
+    ([LETTER_TYPE], "first", None, "first"),
+    ([LETTER_TYPE, CHOOSE_POSTAGE], "second", "first", "first"),
+    ([LETTER_TYPE, CHOOSE_POSTAGE], "second", None, "second"),
+    ([LETTER_TYPE, CHOOSE_POSTAGE], "second", "second", "second"),
+    ([LETTER_TYPE, CHOOSE_POSTAGE], "first", "second", "second"),
+])
+def test_post_letter_notification_sets_postage(
+    client, notify_db_session, mocker, service_permissions, service_postage, template_postage, expected_postage
+):
+    service = create_service(service_permissions=service_permissions, postage=service_postage)
+    template = create_template(service, template_type="letter", postage=template_postage)
     mocker.patch('app.celery.tasks.letters_pdf_tasks.create_letters_pdf.apply_async')
     data = {
-        'template_id': str(sample_letter_template.id),
+        'template_id': str(template.id),
         'personalisation': {
             'address_line_1': 'Her Royal Highness Queen Elizabeth II',
             'address_line_2': 'Buckingham Palace',
@@ -110,11 +122,11 @@ def test_post_letter_notification_sets_postage(client, sample_letter_template, m
         }
     }
 
-    resp_json = letter_request(client, data, service_id=sample_letter_template.service_id)
+    resp_json = letter_request(client, data, service_id=service.id)
 
     assert validate(resp_json, post_letter_response) == resp_json
     notification = Notification.query.one()
-    assert notification.postage == postage
+    assert notification.postage == expected_postage
 
 
 @pytest.mark.parametrize('env', [