Tax on fixed rate bond

Bobziz

Hi,

So another tax on interest question - Is it possible to pay tax annually on a Nationwide 3 year fixed rate bond where the interest is only paid into the account and is not accessible until maturity? It's my understanding that tax would only become due only when the bond matures. However, as interest is paid annually this would presumably generate an annual interest statement. I would like to pay tax annually to prevent being pushed into the higher rate on maturity.

Many thanks.

refluxer

The consensus seems to be that, in terms of tax, it's when Nationwide reports the interest to HMRC that is key rather than when you can actually access it and this may indeed be annually, if that's when the interest is paid into the account. It might be worth contacting Nationwide to get the official answer ?

Bobziz

refluxer said:

The consensus seems to be that, in terms of tax, it's when Nationwide reports the interest to HMRC that is key rather than when you actually receive it and this may indeed be annually, if that's when the interest is paid into the account. It might be worth contacting Nationwide to get the official answer ?

Thanks. That would make sense.

ranciduk

I’m quitting work at the end of this year for good 

So after that I won’t receive any income from work and won’t receive any benefits of any kind either 

next year, I will receive just over £5000 in savings interest from fixed savings bonds , that mature in July , October and November 

will I have to pay any tax on this £5000+ ?

Dazed_and_C0nfused

ranciduk said:

I’m quitting work at the end of this year for good 

next year, I will receive just over £5000 in savings interest from fixed savings bonds , that mature in July , October and November 

will I have to pay any tax on this £5000+ ?

Quitting work has no real relevance to your tax liability.

In the tax year from 6 April 2023 to 5 April 2024 what other taxable income will you have on top of the £5,000 interest?

ranciduk

Absolutely nothing

not a penny

wmb194

ranciduk said:

I’m quitting work at the end of this year for good 

So after that I won’t receive any income from work and won’t receive any benefits of any kind either 

next year, I will receive just over £5000 in savings interest from fixed savings bonds , that mature in July , October and November 

will I have to pay any tax on this £5000+ ?

Didn't you ask this question in another thread? The answer depends on what other income you'll receive in that tax year. If this is your only income then, on this amount, no as, apart from anything else, it will fall well within the annual personal allowance.

Dazed_and_C0nfused

ranciduk said:

Absolutely nothing

not a penny

Then no tax to pay.

You will use £5,000 of your Personal Allowance and have no tax liability.

This has got nothing whatsoever to do with either the savings starter rate of savings nil rate (aka Personal Savings Allowance), you are not paying any tax be sure your income falls within your Personal Allowance.

You could actually have another £10k+ interest and still not have any tax to pay.

ranciduk

Excellent thanks guys

yep sorry I have asked this on another thread a while back 

but I keep reading conflicting info on the internet!

plus, due to recent rises in interest rates, I’m gonna be earning more interest from bonds than I was expecting a few months back

appreciate your time and help 👍

Bobziz

refluxer said:

The consensus seems to be that, in terms of tax, it's when Nationwide reports the interest to HMRC that is key rather than when you can actually access it and this may indeed be annually, if that's when the interest is paid into the account. It might be worth contacting Nationwide to get the official answer ?

So having spoken to NW, they inform me that they report to HMRC annually. I've looked at HMRC's guidance to banks and building society's on reporting and there doesn't seem to be any requirement for them to report any details about whether interest is accessible. I will confirm with HMRC on Monday, but it appears that I will be able to pay tax annually.

Dazed_and_C0nfused

Bobziz said:

refluxer said:

The consensus seems to be that, in terms of tax, it's when Nationwide reports the interest to HMRC that is key rather than when you can actually access it and this may indeed be annually, if that's when the interest is paid into the account. It might be worth contacting Nationwide to get the official answer ?

So having spoken to NW, they inform me that they report to HMRC annually. I've looked at HMRC's guidance to banks and building society's on reporting and there doesn't seem to be any requirement for them to report any details about whether interest is accessible. I will confirm with HMRC on Monday, but it appears that I will be able to pay tax annually.

I wouldn't waste your time.  If the bank/building society report it HMRC will treat it is taxable.