Personal Savings Allowance guide

coyrls

Kass_Evans wrote: »

I have a three year fixed rate bond taken out in June 2014. The interest I received in 2015 had 20% tax deducted but in 2016 is won't. Neither will 2017. As I do not have access to the interest until 2017 upon maturity do I declare the 2016 interest on the 2016/17 tax return or do I declare it along with the 2017 interest on the 2017/18 tax return when I do have access to the money

Already answered in posts 105-109 in this thread.

Kass_Evans

Where did this information come from as HMRC don't seem to know the answer!!!!

masonic

Kass_Evans wrote: »

Where did this information come from as HMRC don't seem to know the answer!!!!

The information came from HMRC of course since they make the rules. See Example 1 here. Tax becomes due on income in the tax year in which it is received, but "if a taxpayer does not actually receive interest (or have it credited to an account) until a later date, it does not form part of his or her taxable income until it is received". So, is the interest be credited to your account each year?

Kass_Evans

I thank you for your reply but there is no need to so blunt about it. That seems to have answered my question. Once again thanks

Kass_Evans

Yes the interest is credited to my account each year but I am unable to withdraw it until maturity.

talexuser

So with the interest credited each year, the next year you are gaining interest on the interest. So for tax purposes the interest in counted in each year it is credited to the account.
Some term accounts have specific conditions interest will not be paid until the term is over, either you take a big tax hit then, maybe e.g. even taking you into 40% rate, or if you are clever waiting until retired and an e.g. 20% taxpayer to pay less. The new £1000/£500 savings allowance has to be taken into account next month.

Kass_Evans

Hi

I thank you for your reply and it very helpful. I was confused as some websites say tax is only due when you have access to the interest but I now understand that to mean when it is credited to your account.
Once again thanks for the explanation.

Kass_Evans

Thanks for the reply but I would point out the following:

Interest ‘arises’ when it is received or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw.

So if my interest is credited annually but I am not free to draw on it until maturity what tax return do I put it on - annually or on maturity????

bigfreddiel

Kass_Evans wrote: »

Thanks for the reply but I would point out the following:

Interest ‘arises’ when it is received or made available to the recipient. Interest has been made available if it is credited to an account on which the account holder is free to draw.

So if my interest is credited annually but I am not free to draw on it until maturity what tax return do I put it on - annually or on maturity????

You've answered your own question here - just check the sentence with 'or' in it.

You have received the interest, then it must be declared.

Of course it depends on the definition of received. It's in your account so I guess it's been received. Nothing to do with it being available. Which is the other side of the 'or'.

Glad to clear that one up for you. fj

masonic

bigfreddiel wrote: »

Of course it depends on the definition of received. It's in your account so I guess it's been received. Nothing to do with it being available. Which is the other side of the 'or'.

Yes, and the banks are free to dictate this by the way they structure the product and report the income to HMRC, so ultimately the bank is in the best position to tell customers what interest income they need to report - they currently do this with an annual certificate of interest.