SA - declaring interest on NS&I Over 65 bonds

mgdavid

I'm just wrapping up the bits for yr ending 5apr15.
I purchased £10k of NS&I Over 65 3-year bond on 15jan15.
Do I declare the interest from Jan to Apr, or do I wait until I actually receive it in Jan 2018?
TIA.

xylophone

it is a fundamental principle of personal tax (with the exception of the state pension) that you are taxed on when money is received/paid (ie jan 18) not when it is "earned"

For full details see

http://www.hmrc.gov.uk/manuals/eimanual/eim74101.htm

agrinnall

xylophone wrote: »

For full details see

http://www.hmrc.gov.uk/manuals/eimanual/eim74101.htm

That manual is about pension income, I can't see anything in it that relates to bond interest.

I'd be a bit concerned about the definition of 'earned'. In the Key Features leaflet for the 65+ Guaranteed Growth Bond Para 13 states that interest is earned daily, and Para 14 that interest earned is added to the account annually on the anniversary date. Para 70 says that an annual statement will be sent and that the information may be required for the holder's tax return. That all indicates to me that interest does need to be declared each year (starting with the 2015-16 return), not just when the bond matures. However, I haven't read the entire thing so I may have missed something that contradicts this.

http://www.nsandi.com/files/published_files/asset/pdf/65-guaranteed-growth-bonds-key-features-leaflet.pdf

FOREVER21

The interest from my 65+ Bond has just been added to my account and tax deducted as expected.

To my mind when completeing my SA post April I will show the interest paid and the tax deducted and as a non tax payer expect the tax to be refunded.

My understanding of the tax liability generally speaking is the date the interest is paid is the relevant date for taxation purposes.

I do wish that I had not rushed into buying the bonds in Januuary, as if I had waited until the new tax year then it would have been paid gross and I would not have had to wait for a refund.

teddysmum

FOREVER21 wrote: »

The interest from my 65+ Bond has just been added to my account and tax deducted as expected.

To my mind when completeing my SA post April I will show the interest paid and the tax deducted and as a non tax payer expect the tax to be refunded.

My understanding of the tax liability generally speaking is the date the interest is paid is the relevant date for taxation purposes.

I do wish that I had not rushed into buying the bonds in Januuary, as if I had waited until the new tax year then it would have been paid gross and I would not have had to wait for a refund.

Same here,for my husband (We bought ours in March, as numbers still available were dropping rapidly)), who will be taxed on this year's interest.I will have to reclaim my interest and will only have the net interest compounded.


However,if the future gross interest is left in the account , the interest compounded will be higher. At the moment only the net amount is left in ,even for non-taxpayers.

mgdavid

thanks all, especially ag. I've parked the problem and put a note in my file for 2015-16 SA.

agrinnall

I wouldn't be too ready to take my interpretation as gospel, I'm by no means an expert in this, and I seem to recall that when the bonds were first on sale that the talk at the time was indeed that interest only had to be accounted for at maturity. The guidance seems to contradict that but you should make sure of it at some point before next January.

le_loup

Tax is due when interest is paid.
If you are credited with interest, tax is payable.
No ifs, buts or maybes.

xylophone

That manual is about pension income,

It is indeed - I was merely adding some additional information/clarification re tax and state pension income, see post 2.

mgdavid

le_loup wrote: »

Tax is due when interest is paid.
If you are credited with interest, tax is payable.
No ifs, buts or maybes.

|I see big ifs buts and maybes - as credited and paid are not the same thing!
As far as I can say at the moment, on these 3-year bonds interest is calculated daily, credited annually, but only paid at the end of the 3 years.

agrinnall

xylophone wrote: »

It is indeed - I was merely adding some additional information/clarification re tax and state pension income, see post 2.

Fair enough, but labelling the link as providing "full details" seems a bit optimistic when it doesn't cover the OP's question.