Paying tax on a 1 year bond

macman

chrisks said:

Albermarle said:

Tax has not been deducted from interest payments since April 2016 . Is this the first interest you have received in that time?

I only took out the bond in 2019.  Is the interest classified as income tax? 

No, it counts as income, which may or may not be taxable, depending on your other income.

Albermarle

They do not take it from there - it is your responsibility to check whether you need to submit a tax return and pay the tax on the interest you have earned.

You are right in that you should be checking your own tax .

However I saw in another thread that if you do owe tax on interest but do nothing , then at some point HMRC will send you a form to fill in , as they will be aware of it. 

Not sure if that is correct or not?

helibird

Still does not answer the question as to whether this is interest. It is a Sharia bank and the rate quoted on the bond is labelled 'Expected profit' so is the payment interest or dividend which are taxed at different rates? I've just taken out a 2 year bond so I don't need to know yet but sooner or later I am going to have to include this somewhere on my tax return (I am over the £1000  limits for interest earned

helibird

OK did some further searches and found this:

www.telegraph.co.uk/finance/personalfinance/savings/12124992/Will-my-Sharia-compliant-savings-be-tax-free-from-April.html
So it looks like it counts as interest and if within your £1000 savings interest need not be reported

Dazed_and_C0nfused

helibird said:

OK did some further searches and found this:

www.telegraph.co.uk/finance/personalfinance/savings/12124992/Will-my-Sharia-compliant-savings-be-tax-free-from-April.html
So it looks like it counts as interest and if within your £1000 savings interest need not be reported

If it is taxable income and you are completing a Self Assessment return it needs to be included.

If you don't have low enough income to benefit from the £5,000 savings starter rate then any interest not covered by your Personal  Allowance will need to be taxed.  But the first £1000 (or £500) could be taxed at 0%.

You cannot just choose to omit taxable income from your return.

xylophone

https://www.alrayanbank.co.uk/psa
A: Yes, within your Personal Savings Allowance limits. HM Revenue & Customs (HMRC) has confirmed that profits from Sharia compliant savings accounts will benefit from the Personal Savings Allowance.
https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2250

eskbanker

I've always liked this way of phrasing the answer to this question:

poppy10_2 said:

Sally57 wrote: »

So just to clarify/confirm, as a non earner if I invested £30K into BLME for a year and the 'profit' was £660 then although this is not exactly classified as 'interest' it should still be included in my £1000 tax free savings allowance?

Yes. Allah won't class it as interest but HMRC will

General_Grant

Tildaplum said:

They do not take it from there - it is your responsibility to check whether you need to submit a tax return and pay the tax on the interest you have earned.

This will depend on several factors including how much other interest you have earned in the tax year and how much you have have earned via other methods eg  income from working amongst other things

HMRC are informed of my various interest payments.  They then adjust my tax code.  I do not have to submit a tax return.