Income Tax on Bonds

sunnyyorkshire

noh wrote: »

The statements provided by the organisation running your ISA.
They will show the tax reclaims made on the income from the fixed interest securities.
If they have failed to make reclaims on your behalf they wont be shown!

It willl probably become clear when I get the statement, which looking at H-L's site is in April.
Many Thanks

cheerfulcat

sunnyyorkshire, you should be able to check your HL ISA account online. The reclaim should show up shortly after the interest payment.

RayWolfe

Hmmm. Not that straight forward, I'm afraid.
Some fund managers pay the tax WITH the interest payment e.g. New Star. Some pay separately a couple of months after the interest e.g. Invesco Perpetual.
Confusing? You bet, but fear not. We all started out with zero knowledge and didn't even have MSE to help.

noh

All mine, including Newstar and Invesco Perpetual, are paid net of tax and the ISA manager reclaims the tax monthly from HMRC.

RayWolfe

Interesting. I'm with H-L, I wonder if that makes a difference.

cheerfulcat

noh wrote: »

All mine, including Newstar and Invesco Perpetual, are paid net of tax and the ISA manager reclaims the tax monthly from HMRC.

Same here - with Selftrade, anyway.

sunnyyorkshire

H-L have had a 'live chat' session this morning, and someone has asked this question. The answer given by H-L's Danny Cox was 'The interest is paid net of basic rate tax and we reclaim it and credit it to your account. There is a no capital gains tax and you do not have to record either ISA income or any ISA gains on your tax return'.

RayWolfe

sunnyyorkshire wrote: »

The answer given by H-L's Danny Cox was 'The interest is paid net of basic rate tax and we reclaim it and credit it to your account.

Well, I've just got a different answer from them:

"Some funds, for example New Star Managed Distribution, choose to pay the interest gross of this tax credit, and therefore there is nothing to be reclaimed. Other funds, for example Invesco Perpetual Corporate Bond, choose to pay the interest net of the 20% tax credit"

So it does seem that we are all right. Some do it one way and others do it differently. Deep joy! :rolleyes:

sunnyyorkshire

RayWolfe wrote: »

Well, I've just got a different answer from them:
"Some funds, for example New Star Managed Distribution, choose to pay the interest gross of this tax credit, and therefore there is nothing to be reclaimed. Other funds, for example Invesco Perpetual Corporate Bond, choose to pay the interest net of the 20% tax credit"
So it does seem that we are all right. Some do it one way and others do it differently. Deep joy! :rolleyes:

So I suppose the upshot of the original post is that I should stick the fixed interest investments in the ISA fund because;

1. Either income tax will not be chargeable in the first place, or
2. If income tax is charged it will be reclaimed by H-L and repaid into the H-L account

Depending upon the Fund concerened.

Have I got it right?

RayWolfe

Oh yes. You will get the tax back, but not necessarily at the same time that the interest is paid. On a point of detail the tax is ALWAYS paid and then reclaimed (by someone other than you).
So, to summarise, if you want to hold bond funds and you have space in your S&S ISA, then that is the place to put it.