Tax on savings account interest

pecunianonolet

RL11 said:

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 

Interesting point.

I took out 3 bonds with Atom at the end of November. 6, 9 and 12 months. I decided to take interest monthly to make sure some falls in this and the rest in the next tax year as I have only £500 PSA available. Decided to have it paid stright into the account. I did inquire on Friday via chat and asked when Atom is reporting interest of my bonds to HMRC. The advisor wasn't sure but said he will check internally and get back to me by email on Tuesday. 

I have the option to switch date of payment and can add any external account to receive interest. it looks like I have missed the boat and therefore interest for Dec, Jan and Feb will count towards next tax year and any payments from April onwards anyhow, regardless of payment method. 

As I have very little head room in my PSA for this year, I am thinking to change the date of all 3 bonds to payment at 31st March into an external account and get accounted for in this tax year. After interest payment I switch back to have it paid into the bond itself to compound.

Dec, Jan, Feb --> Interest accounts for tax year 23/24 (non accessible funds paid in bond directly)
March             --> Interest paid away and accounts for tax year 22/23
April onwards --> Interest accounts for tax year 23/24

This means when the P800 comes a definitive enquiry of details of what data institutions provided and most likely a never ending saga with HMRC via post, online and maybe phone call. 

Would be so much easier if it would account based on the date paid, regardless of any accessability 

Will update this post when I have a response from Atom.

Dazed_and_C0nfused

pecunianonolet said:

RL11 said:

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 

Interesting point.

I took out 3 bonds with Atom at the end of November. 6, 9 and 12 months. I decided to take interest monthly to make sure some falls in this and the rest in the next tax year as I have only £500 PSA available. Decided to have it paid stright into the account. I did inquire on Friday via chat and asked when Atom is reporting interest of my bonds to HMRC. The advisor wasn't sure but said he will check internally and get back to me by email on Tuesday. 

I have the option to switch date of payment and can add any external account to receive interest. it looks like I have missed the boat and therefore interest for Dec, Jan and Feb will count towards next tax year and any payments from April onwards anyhow, regardless of payment method. 

As I have very little head room in my PSA for this year, I am thinking to change the date of all 3 bonds to payment at 31st March into an external account and get accounted for in this tax year. After interest payment I switch back to have it paid into the bond itself to compound.

Dec, Jan, Feb --> Interest accounts for tax year 23/24 (non accessible funds paid in bond directly)
March             --> Interest paid away and accounts for tax year 22/23
April onwards --> Interest accounts for tax year 23/24

This means when the P800 comes a definitive enquiry of details of what data institutions provided and most likely a never ending saga with HMRC via post, online and maybe phone call. 

Would be so much easier if it would account based on the date paid, regardless of any accessability 

Will update this post when I have a response from Atom.

If the adviser gives you the we don't report the interest yxou do rubbish then you can refer them here,

https://www.gov.uk/guidance/bank-and-building-society-interest-returns

pecunianonolet

Dazed_and_C0nfused said:

pecunianonolet said:

RL11 said:

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 

Interesting point.

I took out 3 bonds with Atom at the end of November. 6, 9 and 12 months. I decided to take interest monthly to make sure some falls in this and the rest in the next tax year as I have only £500 PSA available. Decided to have it paid stright into the account. I did inquire on Friday via chat and asked when Atom is reporting interest of my bonds to HMRC. The advisor wasn't sure but said he will check internally and get back to me by email on Tuesday. 

I have the option to switch date of payment and can add any external account to receive interest. it looks like I have missed the boat and therefore interest for Dec, Jan and Feb will count towards next tax year and any payments from April onwards anyhow, regardless of payment method. 

As I have very little head room in my PSA for this year, I am thinking to change the date of all 3 bonds to payment at 31st March into an external account and get accounted for in this tax year. After interest payment I switch back to have it paid into the bond itself to compound.

Dec, Jan, Feb --> Interest accounts for tax year 23/24 (non accessible funds paid in bond directly)
March             --> Interest paid away and accounts for tax year 22/23
April onwards --> Interest accounts for tax year 23/24

This means when the P800 comes a definitive enquiry of details of what data institutions provided and most likely a never ending saga with HMRC via post, online and maybe phone call. 

Would be so much easier if it would account based on the date paid, regardless of any accessability 

Will update this post when I have a response from Atom.

If the adviser gives you the we don't report the interest yxou do rubbish then you can refer them here,

https://www.gov.uk/guidance/bank-and-building-society-interest-returns

I already stated that in my question to them that I want to know when Atom reports to HMRC as it's their obligation to do so. I am, sadly, far off the limit by when I have to report interest via self assessment to HMRC vs. banks and building societies have to do it for me. 

RL11

I got this from Atom:
"So we report to HMRC each year with what you earnt in that tax year - so in other words we would not report the total interest at the end of the 5 years it will be what you earnt in each tax year whilst you had the 5 year account with us."

RL11

https://www.gov.uk/guidance/bank-and-building-society-interest-returns

Best bit of info I've seen on this subject!
So it's UK Law that Banks and Building Societies have to submit interest paid gross each tax year. Then the only way HMRC can tally what the provider says, with what the individual says, is on an annual tax year basis. This probably explains why HMRC are so coy with clarifying the rules. Even it was the case that you were supposed to declare the total interest at maturity, it would be a nightmare trying to trace which accounts are multi year with no early access. It's much easier for HMRC to just deal with everything on a tax year basis

RL11

BTW: Had to advise one provider that they do need to submit figures to HMRC after they told me they didn't!

EthicsGradient

And the latest reply from yet another HMRC admin on RL11's thread:

"Posted about 14 hours ago by HMRC Admin 19 

Hi rl11,

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

Thank you."

I *think* that's replying to RL11's scenario where you get a statement saying the amount has been added to the account. Certainly, HMRC's instructions to the providers is to report interest that has been "paid or credited", and there's no apparent way in the format of information they get to say "this was credited to the account, but they can't withdraw it yet". So now we're back to "if the provider tells you interest has been credited to the account, then it has arisen at that point, and is taxable in that tax year".

Great. I really don't think HMRC has an agreed policy on this.

wmb194

EthicsGradient said:

And the latest reply from yet another HMRC admin on RL11's thread:

"Posted about 14 hours ago by HMRC Admin 19 

Hi rl11,

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

Thank you."

I *think* that's replying to RL11's scenario where you get a statement saying the amount has been added to the account. Certainly, HMRC's instructions to the providers is to report interest that has been "paid or credited", and there's no apparent way in the format of information they get to say "this was credited to the account, but they can't withdraw it yet". So now we're back to "if the provider tells you interest has been credited to the account, then it has arisen at that point, and is taxable in that tax year".

Great. I really don't think HMRC has an agreed policy on this.

But with these Atom bonds they have had the option to have it paid away ie. they have access to the interest. The fact that they decided to reinvest it in the account and consequently give up access until maturity is irrelevant.

pecunianonolet

Hi all,

As mentioned before, here is the response I received by Atom today after my inquiry last Friday:

Hey pecunianonolet,

 

Firstly I'd just like to thank you for your patience whilst I was looking into your enquiry. I can now confirm that the amount of interest that will be reported will be from the start of the financial tax year, so from April 6th to April 5th. In your case pecunianonolet the interest earned from the account opening to the financial year cut off date would be reported to HMRC.

We would then report any interest earned from the start of the Financial year until the maturity of account.

I hope that makes sense and that I have answered your question. If you do have any further questions please don't hesitate to ask by relying to this email or calling us on 0333 399 0050 and we will be more than happy to answer any further questions that you may have.

Thank you,

* 6, 9 and 12 month bond opened end of November 22, monthly interest to be paid into bond.

RL11

It seems crystal clear now that providers report interest earned per tax year - in fact it is uk law that they do.
Obviously if no interest is paid/received into the bond account until maturity, all of the interest would only be reported in the tax year that it is.
The only grey area is if interest is paid into the bond account during each tax year and that bond runs across more than 1 tax year, do you report the interest each tax year, according to the amounts received and reported per tax year or do you report the total interest received, over the whole term, in the tax year of maturity.
The answer seems to be each tax year if you can access the interest but at maturity if you can't.
The only reason I can think that you might want to wait until maturity, is if you need access to the principal & interest in order to be able to afford to pay tax on the interest!
Therefore if your total interest for the tax year is less than your PSA you should always be able to report interest annually