5% accounts - which would you go for?

pedrodelgado

Rheumatoid said:

pedrodelgado said:

Rheumatoid said:

Looks like maybe Close brothers 5.05 now probably best bet

Along with United Trust Bank at 5.05% and if you want all interest paid on maturity after 5 yrs ,it'll compound each yrs interest ,thus giving you an equivalent yr rate of 5.58% but watch out for your tax status getting it all in the one year. 
Just opened an account ,really easy to do and fund, any questions are very quickly answered. Would not hesitate to recommend. Have 14 days to fund from application acceptance so if you want to stop the clock on the 5.05% rate 5yr account best act quick is my advice.

Good point about tax. Didn't see option to opt for annual or at maturity when I applied though.

Did you open Close or UTB?

UTB. 5 yr. It says on application do yo want compounded each yr and paid out on anniversary (5yr)

pedrodelgado

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

I'm sure i've read otherwise?

Rheumatoid

pedrodelgado said:

Rheumatoid said:

pedrodelgado said:

Rheumatoid said:

Looks like maybe Close brothers 5.05 now probably best bet

Along with United Trust Bank at 5.05% and if you want all interest paid on maturity after 5 yrs ,it'll compound each yrs interest ,thus giving you an equivalent yr rate of 5.58% but watch out for your tax status getting it all in the one year. 
Just opened an account ,really easy to do and fund, any questions are very quickly answered. Would not hesitate to recommend. Have 14 days to fund from application acceptance so if you want to stop the clock on the 5.05% rate 5yr account best act quick is my advice.

Good point about tax. Didn't see option to opt for annual or at maturity when I applied though.

Did you open Close or UTB?

UTB. 5 yr. It says on application do yo want compounded each yr and paid out on anniversary (5yr)

Thanks, looks like Close only pays annually so that's good for me.

pedrodelgado

pedrodelgado said:

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

I'm sure i've read otherwise?

It's a strange rule (aren't all tax rules). It says interest becomes taxable when paid but accrued interest is not. So the question is, if on a 5 yr fix the interest is paid into your bond ,is it classed as accrued or paid? Being as you can't actually withdraw and access it. Grey area in my opinion. Glad i'm retiring soon and I'll have a much more generous tax free allowance than the standard £1k. 

happybagger

This has been done to a death before now.

Interest 'accrues' daily. It is not taxable daily.
When it is added to your account annually, it has been "paid". Whether you can access it or not is not relevant. It forms part of your earnings in that tax year.

If it's a five year bond, and interest is added to the account annually, you will have interest over five tax years.

happybagger

pedrodelgado said:

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

I'm sure i've read otherwise?

If interest is not added to the bond until the end of the whole period then ALL of the interest will fall in one tax year.

Not many won't allow the compounding. UBI don't. I don't think Oxbury do either, but can't check as they don't have one available atm.

pedrodelgado

happybagger said:

This has been done to a death before now.

Interest 'accrues' daily. It is not taxable daily.
When it is added to your account annually, it has been "paid". Whether you can access it or not is not relevant. It forms part of your earnings in that tax year.

If it's a five year bond, and interest is added to the account annually, you will have interest over five tax years.

That does make sense but I was just going on a 'which' magazine article that said if you can't access it like in a multi yr fixed rate bond it doesn't count as that yrs allowance. 

Millyonare

happybagger said:

This has been done to a death before now.

Interest 'accrues' daily. It is not taxable daily.
When it is added to your account annually, it has been "paid". Whether you can access it or not is not relevant. It forms part of your earnings in that tax year.

If it's a five year bond, and interest is added to the account annually, you will have interest over five tax years.

It may have been done to death, but it's clearly not been explained for every circumstance, and most people still don't fully understand the (ridiculous) tax rules for multiyear fixed savers.

For anyone still wondering, this Which? guide explains it well. The answer is, you have to phone each and every bank and ask when they will make your savings interest available and accessible (two different terms). Both events are taxable on the same year they happen.

1. Available?
2. Accessible?

refluxer

Albermarle said:

refluxer said:

happybagger said:

Interest paid to the bond on the anniversary date is part of that tax year's income. The interest becomes withdrawable when the bond matures but all the rolled-up interest is not considered earned in that one final tax year.

That definitely makes sense, but do we know for definite that all banks report annual interest to HMRC (on fixed rate savers of 2 years or more) when it is paid into the account each year, though ? If this was a concern, I thought the general advice was to contact the bank to check whether they do actually report it annually or only on maturity. 

On this thread Interest - paid monthly or annually? — MoneySavingExpert Forum
You ( and others ) state that having interest paid monthly into the account for any  fixed rate/term account, means that the interest is spread out from a tax point of view.
So logically having the interest paid annually for a two year fix, must do the same ?

If it depends on the provider then presumably that would be the same in both cases ?

Umm... yes, that's a good point. My brain hurts...

Albermarle

Millyonare said:

happybagger said:

This has been done to a death before now.

Interest 'accrues' daily. It is not taxable daily.
When it is added to your account annually, it has been "paid". Whether you can access it or not is not relevant. It forms part of your earnings in that tax year.

If it's a five year bond, and interest is added to the account annually, you will have interest over five tax years.

It may have been done to death, but it's clearly not been explained for every circumstance, and most people still don't fully understand the (ridiculous) tax rules for multiyear fixed savers.

For anyone still wondering, this Which? guide explains it well. The answer is, you have to phone each and every bank and ask when they will make your savings interest available and accessible (two different terms). Both events are taxable on the same year they happen.

1. Available?
2. Accessible?

As I understand this article, it is saying that if the fixed rate bond is not normally accessible ( which is the case for nearly all of them) and you do not take any payments from the bond to an outside account, then tax is calculated in the year that the bond matures.
This is the opposite of what HappyBagger says. 
So....