Pensioner Bonds Guide

Aged

2010 wrote: »

Bills of up to £80 will arise because new pensioner bonds will pay interest at the end of the term - yet tax on that interest will be due annually

Interest only becomes taxable at the point at which it is credited, surely?

alanq

Aged wrote: »

Interest only becomes taxable at the point at which it is credited, surely?

Interest is credited to the account annually but cannot be withdrawn until maturity. Higher rate tax payers will have to pay the additional 20% tax due for the previous financial year before they can access the interest itself.

colsten

alanq wrote: »

Interest is credited to the account annually but cannot be withdrawn until maturity. Higher rate tax payers will have to pay the additional 20% tax due for the previous financial year before they can access the interest itself.

This sounds a non-issue.

mgdavid

colsten wrote: »

This sounds a non-issue.

I agree - it's a 2-figure sum, hardly a deal-breaker.

Aged

mgdavid wrote: »

I agree - it's a 2-figure sum, hardly a deal-breaker.

It's the principle of the thing though - having to pay tax on income that you haven't received yet? A bit off, I'd say :undecided

Archi_Bald

Aged wrote: »

It's the principle of the thing though - having to pay tax on income that you haven't received yet? A bit off, I'd say :undecided

You are missing the point - nobody will have to pay any tax on anything they have not received yet.

Say the interest gets paid (into the PB) in January 2016. Where it is then earning further interest, but that's just a by-the-by. The account holder then has until end of January 2017 to declare the interest received. Some time later, the HMRC will send them their final assessment (in my experience this can be anything from 2-6 months after submitting the tax self assessment). Depending on their overall tax affairs, the account holder may then have to pay a few pounds extra.

I'd like to see the higher or additional rate tax payer who would lose any sleep over this "issue". They would truly be a rare specimen.

Aged

Archi_Bald wrote: »

You are missing the point - nobody will have to pay any tax on anything they have not received yet.

Say the interest gets paid (into the PB) in January 2016. Where it is then earning further interest, but that's just a by-the-by. The account holder then has until end of January 2017 to declare the interest received. Some time later, the HMRC will send them their final assessment (in my experience this can be anything from 2-6 months after submitting the tax self assessment). Depending on their overall tax affairs, the account holder may then have to pay a few pounds extra.

I'd like to see the higher or additional rate tax payer who would lose any sleep over this "issue". They would truly be a rare specimen.

Um, I think it's you who is missing the point. Interest credited in Jan 16 will be declared on the 2015/16 tax return (even though it hasn't been remitted yet) . Once a new source of interest is notified to HMRC, the tax coding for the 2016/17 tax year will be adjusted to in effect collect the higher rate tax due re the anticipated interest from that source from other taxable income that taxpayer receives such as pensions etc. So they will be paying the tax up front, before they've received the interest.

All I'm saying is that in principle it's unfair and probably the interest should be credited gross.

Archi_Bald

Well, may be you should inform yourself a bit more before you make further comments. Yes, interest earned in January 2015 must be declared in any 2015/16 tax return, but everybody has until 31 Jan 2017 to submit that (in form of an online tax return).

But regardless of when tax returns are due, and when the account holder might have to pay additional tax: I repeat, no tax will become due on anything that the account holder has not received. There is nothing unfair.

Stop making mountains out of a molehill. Especially since nobody even knows whether any higher and/or advanced rate tax payers cba with Pensioner Bonds in the first place.

Aged

You need to learn some manners sir!

ColdIron

Aged wrote: »

the interest should be credited gross.

One problem with gross payments (I assume you mean on maturity) is that the beneficiary would be required to pay tax on a larger amount in the final year, possibly enough for some people to be nudged into a higher tax band. This does seem to be the fairest way to do it