NS&I Bonds and tax

bjbyorkshire

Hello, I'm getting the year end tax certificates from Banks etc together and have 3 NS&I bonds. The only tax certificate I have received is for one that matured on 11 April 2018. I rolled this over into another bond at a lesser interest rate.

I have a certificate of interest for this matured bond so I know that has to be entered on this years tax form but the other bonds which are still running until 2020 and 2021 don't have a certificate of interest. They state on the form that I received (Interest Capitalisation). No mention that this is your interest statement for 2018/19.

Do others put this interest capitalisation down each year on their self assessment tax forms or do they wait for the maturity at the end of the 3 years and then all the tax is payed in that tax year?

If any money is withdrawn before the bond matures then a penalty is payable so the interest is not really available until maturity.

Any one else have these ones and can help clarify please?

xylophone

Your Bond earns interest at the fixed rate every day. We add interest to the Bond on each anniversary of the date you bought it.
We add interest without deducting tax. The interest is taxable income for the purposes of UK income tax, so you may need to declare it.

If any money is withdrawn before the bond matures then a penalty is payable so the interest is not really available until maturity.

https://www.telegraph.co.uk/money/ask-a-money-expert/when-does-the-interest-on-my-fixed-rate-bond-contribute-to-my-pe/



However, if you had a bond that permitted you to draw on your savings during the term, it would contribute towards your PSA each year. This would apply even if the bond charged an access penalty.

For example, NS&I’s Guaranteed Growth three-year bonds pay the 4pc interest annually. Savers cannot access their money unless they surrender 90 days interest. The interest earned each year would contribute to their PSA as it is technically available.

An HMRC spokesman explained: “The existence of an interest penalty does not mean that the saver is not free to draw on their savings.”

bjbyorkshire

after reading all of that i guess it boils down to yes I need to declare the interest each year.

Why then do NS&I not send the same statement of interest for each and every account, that would say interest for tax year blah blah blah is £.

Im really fed up with time sent trying to access all the different accounts we have to trawl through to get the interest to declare. It used to be so simple when the Halifax just took the interest each year and paid the tax man. If you were a non tax payer you then claimed the interest back.

Nothing is ever made more simple, always more complicated.

Thanks

polymaff

xylophone wrote: »

An HMRC spokesman explained: “The existence of an interest penalty does not mean that the saver is not free to draw on their savings.”

That's careless of the HMRC spokesman and/or the journalist. NS&I have been careful to make it clear that the charge for early redemption is not an interest penalty, but a charge which just happens to be equivalent to a certain amount of interest. Quite different.

bjbyorkshire wrote: »

Why then do NS&I not send the same statement of interest for each and every account, that would say interest for tax year blah blah blah is £.

Well, they do for Guaranteed Income Bonds. I have a pile of them here and a lot of that 1kg+ of bumpf misdeclares the interest in terms of which tax year it falls in.


So you can't win...:)

bjbyorkshire

Well that's really bad Polymaff, how can an institution like NS&I send out interest statements for the wrong tax year. It must be automated surely.

My Guaranteed Growth Bonds look to have the correct year and amount of interest. In your opinion then, I do need to enter the Interest Capitalisation amount on this tax year, then again on each tax year up to the maturity statement?

One smaller £3000 Investment Guaranteed Growth Bond (slightly different wording from the other two) matures in 2020. I didn't declare the first years interest last year. Not sure what to do regarding that.

How complicated it all is.

I have a state pension, not quite the full pension as I had a few years of not paying a contributions, plus a small private pension which together add up to in the region of £9,000 per year. I gave husband the Married couples allowance. My savings interest will be roughly £1600 this financial year. £1000 of this interest is tax free but is the other £600 taxed at 0% as I am below the threshold of £17,500?

Thanks for any other info you can provide, much appreciated.

I was sent a form last year to say I don't have to fill in self assessment this year if nothing changes. Well things have changed slightly as I have most of our savings in my name as husband is a tax payer. Hence me earning over £1000 in interest.

polymaff

bjbyorkshire wrote: »

Well that's really bad Polymaff, how can an institution like NS&I send out interest statements for the wrong tax year. It must be automated surely.

There's no excuse for such incompetence. NS&I repeatedly claimed that they were right, so I got HM Treasury - their boss - to tell them they were wrong, to apologise to me and to render correct statements.

This sort of happened. NS&I did render new statements - still wrong - and whilst admitting their error,

a) said that they were not going to update the false information they had passed to HMRC, and,

b) said that they were not going to change their procedures, so it would be up to HMRC and me to sort it out next year.

What an attitude. I got in touch with HMT again - about the still-incorrect statements and about NS&I refusing to change their faulty procedures.

This went through five iterations - the final, lame, statement by NS&I blaming the errors they continued to make being down to the certificates having to be generated by humans !

NS&I have stuck to their refusal to update procedures - so the latest initial issue of the certificates for 2018/19 are also wrong. Which reminds me - I need to chivvy HMT.


Here's an example:


https://imgur.com/GMTGAZd

polymaff

bjbyorkshire wrote: »

My Guaranteed Growth Bonds look to have the correct year and amount of interest. In your opinion then, I do need to enter the Interest Capitalisation amount on this tax year, then again on each tax year up to the maturity statement?

My opinion is that for both annually and monthly-computed and compounding NS&I accounts, the interest arises when it is credited - even if there were no withdrawal option. My reasoning being that by accepting the terms and conditions of the account, you have instructed your agent, NS&I in this case, to reinvest the interest - implying that you had the interest - even if only for an instant.

Some institutions offer three options for multi-year investments: monthly compounded, annually compounded and end-of-term compounded interest. To me, only the last of these three options results in a single "arising" point.

But I could be wrong! Trouble is that there is the legislation's opinion, HMRC's opinion and my opinion - and who is going to be Solomon?...:rotfl:

For an illustration of the above, see all of the commentary in the media about Marriage Allowance Transfer. Absolute mayhem - still..:(