SA - declaring interest on NS&I Over 65 bonds

le_loup

mgdavid wrote: »

|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.

If you have been credited, you have been paid.
The fact that you have agreed not to have it paid out into another account or in cash, is beside the point.
Lots of term deposits cover more than one year but interest is credited annually. This account is no different with the possible exception that you cannot chose to take the interest out after it has been credited.

FOREVER21

mgdavid wrote: »

|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.

As I said in post #5 interest has been added to my account, with tax paid, after the first year.

If I wanted to I could close the account and the balance including interest would be available ( albeit suffering a penalty for early closure).

To my mind this is no different from other fixed rate , fixed term accounts I have had, interest paid annually and taxed at the date of payment.

In my opinion the interest should be included every year on. SA, as I have done in previous years, and HMRC have always refunded the tax without question, as I am not a tax payer.

xylophone

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

I should have said "full details regarding tax and pension"........

ChiefGrasscutter

FOREVER21 wrote: »

In my opinion the interest should be included every year on. SA, as I have done in previous years, and HMRC have always refunded the tax without question, as I am not a tax payer.

Exactly:
As per every other Building Society multi-year bond where interest is credited (and indeed tax deducted) back to the bond each year - but access only occurs at the end of the bond's term.
The interest should be declared on your SA in the tax year in which the interest was credited to the account.

polymaff

booksurr wrote: »

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"

Can you elaborate on this, please? I was assuming that the amount of state pension I actually receive in FY 2015/16 will be what I should expect to be assessed on in SA FY2015/16.

jimmo

ChiefGrasscutter wrote: »

Exactly:
As per every other Building Society multi-year bond where interest is credited (and indeed tax deducted) back to the bond each year - but access only occurs at the end of the bond's term.
The interest should be declared on your SA in the tax year in which the interest was credited to the account.

http://www.hmrc.gov.uk/manuals/saimmanual/SAIM2400.htm

xylophone

Can you elaborate on this, please? I was assuming that the amount of state pension I actually receive in FY 2015/16 will be what I should expect to be assessed on in SA FY2015/16.

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

polymaff

patanne wrote: »

The calculation of tax on state pension seems to be done in the most complicated way possible. You are not taxed on when you actually receive it, but on when you would have received it if paid weekly. HMRC are notified by DWP of how much it is.

I received my first payment just in the new tax year and received a bill for 2 weeks tax with the third weeks being done in the new tax year's self assessment.

Thanks. So you're tax-treated as receiving 52 or 53 weekly payments each tax year based upon how many, say, Thursdays fall within 6th April to next 5th April, inclusive, irrespective of how the four-weekly payments occurred? I'd wondered if this would be the case. When do you expect to receive the detail of your DWP figure for State Pension income deemed to be paid in Tax Year 2015/16?

@xylophone: couldn't see any relevant guidance at that web-link. Any thoughts?

xylophone

xylophone: couldn't see any relevant guidance at that web-link. Any thoughts?

"The amount of taxable pension income is determined by reference to the relevant Chapter of ITEPA 2003 that applies to the pension or annuity in question. In many cases, the taxable pension income for a tax year is the amount accruing in that year irrespective of when any amount is actually paid. Where accruals basis applies, the pension, etc. should be assessed on the amounts that the pensioner is entitled to in the tax year

Pensioners are often content to pay income tax on the amount received in a year, as, in most years the amounts accruing and received are similar. However, it is possible in certain circumstances for the amounts to be different. If a taxpayer requests the statutory basis this should be accepted.

The following table shows how to find the amount of taxable pension income for different categories of pension income.


Type of income
Amount taxable
United Kingdom pensions (see EIM74003) Full amount accruing in the tax year
Foreign pensions See EIM74500
United Kingdom social security pensions Full amount accruing in the tax year (see EIM74600)

For example, if you were paid four weekly in arrears, you could find yourself straddling two tax years.

Half the amount accrued in say 2014-15, but you actually received the money into your account in 2015-16.

Therefore the question becomes do you pay tax on the whole amount received in the tax year 2015-16 or should the amount that "belonged" to 2014-15 be declared and taxed in that year.

As far as I can see from the above, HMRC will do it their way (accrual in the tax year) unless you tell them otherwise?

polymaff

patanne wrote: »

This depends on how you pay the tax. If you have a pension other than the state pension then you will get a tax code notification which includes (or deducts) the amount of state pension.

Many thanks. This is my position - and what you describe is already happening, i.e.

Start State Pension, early December 2015
Tax Code dropped by 614 points, late December 2015
Tax Code reverts back to 1060, mid January 2016.

Can't make any sense of it - first assuming that I would get an entire years-worth of SP (panic measure?) - then going back to pre-SP coding.