Claiming tax back on savings interest

SallySunshine

Can you please help settle an argument.

A 3yr fixed rate bond has the annual interest accumulated.

Does the bond owner apply to have each years interest paid back from the taxman or does he have to wait until the bond matures and then claim it back in one go.

The person in question prefers to fill in a S.A. form rather than claim gross interest as their circumstances could change.

I'm struggling with this, as surely tax allowances etc can change annually.

A simple answer please

Lokolo

You say accumulated, but when is the interest paid? Annually or after the 3 year term.

opinions4u

It depends when the interest is added.

If it's all lumped on at the end, then the tax liability falls at the end and that's when the reclaim applies to.

If the interest is added annually, then the tax liability falls in three different tax years. A reclaim applies to each tax year.

SallySunshine

Thanks for prompt replies.

The interest is added annually to the bond.

I'm asking this question because the person in question has a bond maturing early next year.

He didn't claim back the annual interest as he reckoned he didn't have it 'in hand' so to speak and it just got added on the the bond.

He reckons when the bond matures he can claim back his tax paid over the 3 years on his next S.A. form.

When I voiced my doubts about this he said he'd never received anything from his bond provider re the annual interest statement.

Anyway, is it possible for him to claim those years interest back.

He's also got a Stroud & Swindon 5 year Stepped Bond, started at the beginning of this year, and I need to convince him to claim his interest back annually. I think he worries how to work it out , surely the provider will send him an annual statement, or will they?

By the way, the only income he has is his savings and he is under 65.

Lokolo

Does he currently fill in a SA form or not? You've said he prefers to do it this way rather than claim gross etc. but actually you don't need to fill in a whole S.A. form, just an R40.

http://www.hmrc.gov.uk/incometax/tax-free-interest.htm

Go down to the section about How to Claim Back, and theres a link bellow the table to take you to the R40 form.

But the provider should be sending annual statements yes, which he uses with the R40, which is then used to calculate how much he is entitled to back.

SallySunshine

Thanks Lokolo, at least now he can claim back the tax he missed out on.
He has filled in a S.A. form since he used to be self employed, when he stopped work and did away with using an accountant he decided to claim his tax back that way, as did his wife but since she now works and has no tax to claim back, he just claims his half of their savings interest.

Won't the taxman ask why he isn't filling in a full S.A. form in or will they just accept the R40?

Lokolo

They've always just accepted the R40 for me.

oldfella

if he hasnt got access to the bond interest then you could argue it all becomes liable at the end of the term

SallySunshine

I've just looked at the R40, and it seems more complicated than the S.A. form which he has been filling in happily for years, but at least he has the choice.

He's just informed me that looking over his paperwork he has claimed the interest after all!!!

Anyway I've persuaded him to set up a sort of spreadsheet where he can enter his savings interest immediately he is informed of it and that way hopefully will never miss out on claiming it back.

Many thanks for your help, and to be quite honest although I have a spreadsheet of investments and when interest/maturity is due, I end up shoving interest statements in a folder somewhere. So now I'll amend mine to show the interest next to the relevant bond etc so I've got the info all in one place at a glance.

jennifernil

The R40 is pretty straightforward, most of it will not apply to him anyway.

He will have to wait till the end of the tax year in question, then claim all the tax back on the various interest payments.

I do it every year, and the repayment comes through in 2-3 weeks usually. Followed by a form in the post for the following year. I reckon it is faster than the SA method, but you have to do a paper form. Does he do a paper return at present?

He could save himself a lot of trouble by registering for gross interest.

oldvicar

With the R40, you don't even have to wait until the end of the tax year. If for example all your accounts pay annual interest, and all have paid out for the current tax year, e.g. on 30 September, or 31 December or whatever, then you know all the details for the full year - submit these as an estimate and say that nothing is expected to change by the end of the tax year, and you can be paid a refund of tax even sooner.