The Top Fixed Interest Savings Discussion Area

StayinAlive

OH has just had a tax demand for an amount that we were not aware of.

After a long call to HMRC it appears that the amount applies to two Secure Trust One Year Bonds.

What Secure Trust appear to have done is calculate the amount of interest up to 31st December and declared that to HMRC even though the amount was not beneficially available but just rolled over on the statement, to be actually paid on maturity the later on in the year.

My understanding is that she should not have been taxed on interest amounts that were not available to her at the time. We have several 1 year bonds with other suppliers and never come across this before even though, by definition, all 1 year bonds must transition through December.

Has anyone else noticed this with Secure Trust or thoughts as to how to reassign all the interest to the maturity date. (It makes a difference as she was, and will remain a non-taxpayer if interest is allocated correctly).

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81889649#Comment_81889649

I have a 3 year fix with Secure Trust. It compounds interest to the account annually on 31 Dec and pays out on maturity. I declare the interest annually, as advised by an HMRC advisor, because Secure Trust give the option in their T&Cs that you can choose to either have interest added to your account or paid away to your nominated account, and that you can change your preference at any time. Although I choose to have the interest compounded, the fact I can choose to have it paid away makes it accessible.

intalex

My experience is also an interest credit on each 31 December and a final one on maturity, and although mine have always been multi-year fixes, I can see why they keep it consistent for the 1-year fix. I'm not sure if there is a consistent process to ask HMRC to supersede the reported credited interest with accessible interest, which is what the rules state, hopefully someone will know how to achieve this…

fuzzzzy

I guess it depends on whether the December interest is deemed as accessible or not as per the T&C s of the account. It is a bit of a grey area. Different HMRC advisors have been known to give different interpretations.

It is probably only safe to assume interest is not accessible if T&C s make it clear that interest cannot be paid away and is only accessible at maturity.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81889807#Comment_81889807

It's 100% safe to assume it accrues immediately when paid away, which is why I opted for this treatment with STB from the outset. My interest is then compounded into one of my regular savers at a higher rate.

intalex

The more important question is whether there is a consistent process to ask HMRC to supersede the reported credited interest by accessible interest in each tax year… each to their own on justifying it either with T&Cs, intent or mere actuality

masonic

https://forums.moneysavingexpert.com/discussion/comment/81890356#Comment_81890356

The best option is to file a tax return. Otherwise you're at the mercy of getting through to a knowledgeable person on the phone.

intalex

https://forums.moneysavingexpert.com/discussion/comment/81890364#Comment_81890364

From HMRC's perspective, they'll probably also want to know that such "deferrals" from the reported credited annual interest do eventually come through in due course (in respective maturity tax years)… how can they systematically track this to make sure full income is reported one way or the other, without any "leakage"?

It's obvious the easier change would be to reprogram how savings providers should report interest… or perhaps for fixes, interest should only either get paid OUT monthly (for straight-line taxable income) or all at maturity (lumpy), this should cater for most if not all savers on how (from the outset) they intend for their taxable income to come through…

masonic

https://forums.moneysavingexpert.com/discussion/comment/81890437#Comment_81890437

Ending the practice of "crediting" inaccessible interest would do the job. Just credit all the compound interest at maturity like some providers already do. It is one area where NS&I do well in offering an income and growth version of their fixes.

I don't know what HMRC may be doing behind the scenes to reconcile interest reported in different ways than BBSI returns suggest. I know they've never queried anything with me, but over multiple tax years my cumulative figure would end up being very similar to the cumulative figure from BBSI, just reported in different years as I have enough savings interest from other accounts to consume my PSA and not enough income to bust my basic rate band. But I've not heard of anyone else having their self-assessment figures queried either - just issues from those leaving it in the hands of HMRC to calculate.

intalex

https://forums.moneysavingexpert.com/discussion/comment/81890476#Comment_81890476

Good point - I hadn't thought about NS&I when this came to my mind, but their Guaranteed Income and Growth Bonds pretty much represent the 2 options I was thinking of…