Tax On Fixed Term Accounts

Al_Ross

Put some money away last year into several different fixed term accounts,some accounts were for ,2,3 and 5 years and some were fixed term bonds.

My question is does this interest have to be declared on 2011/2012 tax return or when the accounts actually mature?

jennifernil

You declare it for the year in which it was actually paid. Even if it is added to the account and cannot be withdrawn.

Some fixed term accounts add the interest annually, others at the end of the term.

John_Pierpoint

If you want to confuse yourself just put the following into Google:
HMRC "Qualifying time deposit"

Basically you can be paid gross interest if the investment is at least 50K and the interest is not rolled up inside the "bond".
You still have to report it on your annual return.

If you think your estate may have to pay Inheritance Tax (IHT) it makes your estate easier to manage if your accounts pay monthly interest and it may save a bit of tax too, as the tax man taxes the accruing interest that has yet to be added to the account.
(Why the institutions cannot "close" the account as at the date of death and immediately re-open it in the name of "the personal representative of "X" deceased" escapes me (thus crystallising the interest and basic rate income tax on it); but they don't work that way.