Tax on savings account interest

RL11

EthicsGradient said:

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.

The account is with Atom. It's all app based. I can switch to having the interest paid to an external account anytime. I mentioned this on HMRC forum as surely an indication that I can access interest if I want. However interest already received remains in the bond account 

RL11

I can switch between monthly and annually too and I can change the day of payment. I can't set it to only pay interest at maturity though!

wmb194

Goldenyears said:

wmb194 said:

Interesting. When you opened these bonds were you given the option to have the interest paid away? I doubt it's anything to do with HMRC being pragmatic, though, just that it doesn't know the terms of your bonds and just works on the basis of the annual returns from financial institutions.

Yes they all had the option to have interest paid into another account which we declined.  Something we are reconsidering with new fixed term bonds.

In which case you did originally have access and so it would probably be correct to account for the interest as arising when it is credited to the account.

Where I can, I always choose to have interest paid away as it avoids this aggravation. 

Having said this I've made the mistake of opening a couple of Nationwide's new online bonds where there is no option to have the interest paid away and apparently it has been telling people that it will report the interest annually to HMRC. Particularly as the amounts involved will be relatively small, I think I'll treat it this way as I doubt HMRC will notice nor care that it's technically incorrect.

RL11

Ongoing query on HMRC Forum about when to declare interest on long term fixed cash bond:

"Can you confirm that your advice is that I should ignore my statements that will show I received £200 interest for tax year 2022/23 and £480 for each tax year 2023/24 through to 2026/27 and £280 in 2027/28 and instead declare that I received all of the interest in 2027/28?"

HMRC Response:

"The amounts should be declared annually and this will be reported to HMRC directly."

wmb194

RL11 said:

Ongoing query on HMRC Forum about when to declare interest on long term fixed cash bond:

"Can you confirm that your advice is that I should ignore my statements that will show I received £200 interest for tax year 2022/23 and £480 for each tax year 2023/24 through to 2026/27 and £280 in 2027/28 and instead declare that I received all of the interest in 2027/28?"

HMRC Response:

"The amounts should be declared annually and this will be reported to HMRC directly."

But what are the terms of this bond? Was there an option to pay interest away during the term? If you're referring to the Atom bond then yes, it's obvious that it should be declared annually as you have/had access to it.

RL11

wmb194 said:

But what are the terms of this bond? Was there an option to pay interest away during the term? If you're referring to the Atom bond then yes, it's obvious that it should be declared annually as you have/had access to it.

There are all sorts of terms but none of them explain how taxation works.
I can have the interest paid away - then it is obvious it's declared annually but then it won't compound. If it's not paid away, it remains with the bond and then it is not obvious if I should declare annually or at maturity. Unless, the fact that I could choose to have it paid away, means it is reported annually, even though I am choosing to leave it with the bond?

jak22

Unless the whole interest amount is clearly only added at maturity. with the balance remaining unchanged during the years until then, the logical thing is to include interest a year at a time in records, calculations and returns.

I'm sceptical about the mechanism of banks reporting interest. They ask for a NI number for an ISA but not usually for other savings accounts so I'm not sure how reliably their information is applied to individual tax accounts - online there isnt a list of interest payments or  an accurate total that might confirm this reporting is working.

Dazed_and_C0nfused

jak22 said:

Unless the whole interest amount is clearly only added at maturity. with the balance remaining unchanged during the years until then, the logical thing is to include interest a year at a time in records, calculations and returns.

I'm sceptical about the mechanism of banks reporting interest. They ask for a NI number for an ISA but not usually for other savings accounts so I'm not sure how reliably their information is applied to individual tax accounts - online there isnt a list of interest payments or  an accurate total that might confirm this reporting is working.

Going off the reports from people who have posted on this forum it's a mixed bag.

Some seem to have complete information whilst others have some accounts missing.

And of course there's been the odd bank (Al Rayan?) who included ISA interest on the taxable interest report 😳

Sarahspangles

jak22 said: I'm sceptical about the mechanism of banks reporting interest. They ask for a NI number for an ISA but not usually for other savings accounts so I'm not sure how reliably their information is applied to individual tax accounts - online there isnt a list of interest payments or  an accurate total that might confirm this reporting is working.

You’ve just reminded me that Nationwide recently sent me a form to complete with my NI number - I do not have an ISA with them.

wmb194

RL11 said:

wmb194 said:

But what are the terms of this bond? Was there an option to pay interest away during the term? If you're referring to the Atom bond then yes, it's obvious that it should be declared annually as you have/had access to it.

There are all sorts of terms but none of them explain how taxation works.
I can have the interest paid away - then it is obvious it's declared annually but then it won't compound. If it's not paid away, it remains with the bond and then it is not obvious if I should declare annually or at maturity. Unless, the fact that I could choose to have it paid away, means it is reported annually, even though I am choosing to leave it with the bond?

No, it's clear. In this circumstance you have access to it so even if you decide to leave it in the account it arises at the time it is paid. You can compound it in another savings account.