Tax on interest

Krakkkers

Is it right that tax on interest is due in the year it is received? So if i put money in the Nationwide 3 year deal at 4.75% it would all be taxable in the year it matured (2025)

eskbanker

Discussed at length recently:

https://forums.moneysavingexpert.com/discussion/6390594/when-does-interest-earned-in-a-fixed-rate-savings-account-count-as-income-for-tax-purposes/p1

Krakkkers

So what was the answer?

Dazed_and_C0nfused

Krakkkers said:

So what was the answer?

I think the real answer (which isn't necessarily the correct one) is that it is taxable in the tax year the financial institution reports it to HMRC.

Notepad_Phil

Krakkkers said:

Is it right that tax on interest is due in the year it is received? So if i put money in the Nationwide 3 year deal at 4.75% it would all be taxable in the year it matured (2025)

If you leave it in the account itself, and there is no means of transferring it out (even under penalty), then there is some HMRC text that would seem to indicate that all of the interest over the term should be taxed in the maturing year.

However I've had various fixed term accounts with various institutions over the years in which I've left the interest to accumulate, and as far as I can determine the interest has always been reported annually rather than at the end of the term - which ties in with Dazed's reply above.

In the absence of the bank/building society explicitly mentioning how they do it, then the safest way to ensure you don't get hit by tax in one hit in the maturing year is to get the interest paid out (either monthly or annually) to a different account.

Ocelot

My interest has always been taxable in the year it was reported to HMRC, even though it wasn't accessible in that year.