ICESAVE FSCS Fixed Rate Bond TAX Question.

Lacking_Interest

I don't know if I am looking into this too deep but I have a question I have not seen answered anywhere.

Icesave customers who opt to keep their fixed rate bonds until maturity will receive all "interest" at the end of the term at the rate originally promised , that I understand.

What I am unclear about is will this really be treated as interest earned as in actual fact it seems to be just enhanced compensation from the FSCS to compensate for the interest lost to maturity.

Will this "interest" be paid with 20% deducted for tax ( or whatever the basic rate at maturity ) ?

What if your tax status changes for example redundancy in these uncertain times , would you be able to submit an R85 to FSCS ?

Will FSCS issue a Section 975 certificate at maturity ?

What about higher rate tax payers , if this is for example to be paid after 20% deduction and is classed as compensation rather than interest will higher rate tax payers avoid higher rate tax on a 7% bond which would make it worth even more ?

Am I asking stupid questions ?

nilrem_2

Lacking_Interest wrote: »

I don't know if I am looking into this too deep but I have a question I have not seen answered anywhere.

Icesave customers who opt to keep their fixed rate bonds until maturity will receive all "interest" at the end of the term at the rate originally promised , that I understand.

What I am unclear about is will this really be treated as interest earned as in actual fact it seems to be just enhanced compensation from the FSCS to compensate for the interest lost to maturity.

Will this "interest" be paid with 20% deducted for tax ( or whatever the basic rate at maturity ) ?

What if your tax status changes for example redundancy in these uncertain times , would you be able to submit an R85 to FSCS ?

Will FSCS issue a Section 975 certificate at maturity ?

What about higher rate tax payers , if this is for example to be paid after 20% deduction and is classed as compensation rather than interest will higher rate tax payers avoid higher rate tax on a 7% bond which would make it worth even more ?

Am I asking stupid questions ?

Firstly you are not asking stupid questions.

I think you will find that any interest/gain will be treated under normal tax rules depending on each individuals circumstances, the only problem is see is how will we get our certificate of tax paid to claim back, lets hope they provide one, if you are registered to receive interest without tax deducted that will apply too.

cos69

I think you will find it treated in the same way as interest for tax purposes as nilrem says.

The big problem for me is, if I get all the interest for several years in one lump sum instead of monthly, then it pushes my income into the next tax band for that year. So you need to allow for factors like that.