Tax on savings account interest

RL11

AmityNeon said:

HMRC does not have access to your accounts (or its terms and conditions); if what your provider reports to HMRC matches the figures you declare to HMRC (if you even have to), how do you expect HMRC to discover anything that isn't reported or declared?

I have to report interest to HMRC as part of claiming back tax paid on my pension. What I'm thinking is that if I report what I've received annually and their records show 0 (if the provider leaves it until the end) are they going to tell me? Or will they just send me a tax bill when the provider reports £2,400 in 5 years time? I guess I can only ask my provider to confirm they do submit the interest annually - and hope they do!

AmityNeon

RL11 said:

AmityNeon said:

HMRC does not have access to your accounts (or its terms and conditions); if what your provider reports to HMRC matches the figures you declare to HMRC (if you even have to), how do you expect HMRC to discover anything that isn't reported or declared?

I have to report interest to HMRC as part of claiming back tax paid on my pension. What I'm thinking is that if I report what I've received annually and their records show 0 (if the provider leaves it until the end) are they going to tell me? Or will they just send me a tax bill when the provider reports £2,400 in 5 years time? I guess I can only ask my provider to confirm they do submit the interest annually - and hope they do!

Yes, I understand your confusion and frustration, but as has been previously advised, you should indeed ask your provider to confirm when they report interest to HMRC (do not assume based on annual certificates of interest you receive).

xylophone

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

It seems to me that if a person is really exercised on this point, he should write to HMRC setting out his particular circumstances  so as tp obtain the definitive answer in writing.

RL11

Well my provider has confirmed they report interest to HMRC annually and they provide me with a Statement of Interest annually, so if HMRC expect interest to be reported when it "arises" at maturity or closure, they need to get some communication out to all providers to say they are all doing it wrong.
Is it possible for someone at MSE to explain this to HMRC so they can agree that how it is working in practice is how everyone would expect it to work (reporting interest annually) so they can update their manuals and remove this completely unnecessary confusion?

km1500

I think reporting is a bit of a red herring

Reporting does not mean it is taxable in that tax year

a (probably not very good) analogy is supposing you had some gold or an asset that was increasing in value each year. You could report the new value every tax year to HMRC but you would not actually need to pay CGT until you sold the asset

RL11

Maybe "reporting" is the wrong word but...
If my provider tells HMRC I received £500 interest and my annual tax year statement shows I received £500 interest, then there can be little doubt that I should report that I received £500 interest.
How on earth could HMRC suppose that I should say I received nothing?

RL11

The analogy is not good, since my CGT is only assessed when the assett is sold - not what the changing value is. If my bond only paid interest at maturity it would be a good analogy, as I would only receive the interest at that point and not monthly/annually

RL11

Actually it's so clear cut when I receive the interest, it's ridiculous that this is a grey area! I have absolutely received interest each month for the last 5 months and there can be no disputing that fact by the provider. They have increased my balance by the interest they have paid. It is my money. They have credited it to me each month. How on earth can HMRC even suppose that it hasn’t actually arisen until I have access to it? Is the provider going to take it away from me? - of course not! I got the interest when it was credited to my account.
Getting cross with England losing! Joking-ish. No emojis

km1500

You 'got' the interest but you can't access it or spend it so although it may show as a figure in your account you haven't really 'got' it hence not taxable until.maturity - at which point you can get it.

EthicsGradient

RL11 said:

@ro1892 yes - that's me!
I get the interest monthly. I can have it paid to an external account and have switched to that, pending a clearer response from HMRC. I want the interest to compound though, so would rather it stayed in the bond account
I just don't understand why it's got to be complicated with establishing when interest "arises". It's so obviously my interest when I receive it, whatever account the interest goes into and whether I can access it

Can I ask what the mechanics of "I have switched to that" were? Did the provider say "OK, you've earned £x.yz of interest so far, that stays in the account with the principal, but from next month, we'll pay out £a.bc to your current account each month?" I would presume the interest you had already earned had to stay in the savings bond, rather than them sending it all to your current account in one go (in which case, it would mean you had clearly had access to it all along).

If you don't mind sharing, who is the account provider? I was surprised that they changed the type of account so readily.