Fixed Rate Bond - PSA Implications

Dazed_and_C0nfused

RG2015 said:

Dazed_and_C0nfused said:

At the end of the day it will be taxable income of the tax year the interest payer reports it as taxable to HMRC.

If interest was credited to your account each month then I would work on the assumption that the interest is going to be taxed in the tax year it was credited, so the majority will be income of 2022-23.

Does this mean that it is the interest payer, rather than HMRC effectively decide the applicable tax year?

It is rather unsatisfactory and concerning that even a “tax expert” like yourself can only recommend making an assumption.

I also recall seeing contradictory answers on the HMRC helpline from their own agents. There was a post from @EthicsGradient on this some while back.

Yes.  There are millions of people in the UK and whilst not all will have dozens of accounts like some MSE posters there must be hundred+ million interest paying accounts reported by the banks and building societies each year so I cannot believe HMRC will be verifying the information on each and every one!

There will no doubt be a process in place if an individual queries the interest reported but as a lot of it will either be covered by the Personal Allowance, taxed at 0% or left to people to self assess I suspect it's a drop in the ocean and in 99.99% of cases it's what the bank reports which will determine the tax year it is taxed.

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

EthicsGradient

RG2015 said:

Dazed_and_C0nfused said:

At the end of the day it will be taxable income of the tax year the interest payer reports it as taxable to HMRC.

If interest was credited to your account each month then I would work on the assumption that the interest is going to be taxed in the tax year it was credited, so the majority will be income of 2022-23.

Does this mean that it is the interest payer, rather than HMRC effectively decide the applicable tax year?

It is rather unsatisfactory and concerning that even a “tax expert” like yourself can only recommend making an assumption.

I also recall seeing contradictory answers on the HMRC helpline from their own agents. There was a post from @EthicsGradient on this some while back.

There had been some contradictory answers from HMRC, but they do now seem to have settled on "taxed at maturity if interest is only available then" (though whether that settles questions about accounts you can change if interest is paid out, I'm not so sure). The details of that are:
First, HMRC Admin 32 said to me it was when you were "notified" of interest that counted - I replied that seemed to contradict the saim2440 manual: Interest on savings - Community Forum - GOV.UK (hmrc.gov.uk)
Then HMRC Admin 2 said it was when the interest could be "accessed"; when I said that didn't seem to match with Admin 32's reply, Admin 32 joined the newer thread, and now said it was access that counted, as saim2440 says: Tax on NRE Fixed Deposit on Maturity. - Community Forum - GOV.UK (hmrc.gov.uk)

I think Dazed_and_C0nfused is right that in practice, HMRC will, unless we get into an argument with them about a specific tax return, just use what the interest payer reports to them. It's a good idea to get someone knowledgeable at the interest payer (ie not just someone answering a general helpline) to tell you what they report (or are going to report; this might give you a chance to argue against whatever they choose, if you think that will be better for you) each year - this also means that, if HMRC says you've done something wrong, you can say you used the interest payer's figures in good faith.

Albermarle

There have been a number of threads on this topic and it seems for longer term bonds, some providers are only reporting the interest at maturity and some are reporting it when it is added to the account, ( usually annually) even though it is not available. Reading the accounts T's & C's or even contacting them directly, does not seem to shed any light on the issue ( call centre staff probably do not know ).

It seems very much a grey area.

RG2015

EthicsGradient said:

RG2015 said:

Dazed_and_C0nfused said:

At the end of the day it will be taxable income of the tax year the interest payer reports it as taxable to HMRC.

If interest was credited to your account each month then I would work on the assumption that the interest is going to be taxed in the tax year it was credited, so the majority will be income of 2022-23.

Does this mean that it is the interest payer, rather than HMRC effectively decide the applicable tax year?

It is rather unsatisfactory and concerning that even a “tax expert” like yourself can only recommend making an assumption.

I also recall seeing contradictory answers on the HMRC helpline from their own agents. There was a post from @EthicsGradient on this some while back.

There had been some contradictory answers from HMRC, but they do now seem to have settled on "taxed at maturity if interest is only available then" (though whether that settles questions about accounts you can change if interest is paid out, I'm not so sure). The details of that are:
First, HMRC Admin 32 said to me it was when you were "notified" of interest that counted - I replied that seemed to contradict the saim2440 manual: Interest on savings - Community Forum - GOV.UK (hmrc.gov.uk)
Then HMRC Admin 2 said it was when the interest could be "accessed"; when I said that didn't seem to match with Admin 32's reply, Admin 32 joined the newer thread, and now said it was access that counted, as saim2440 says: Tax on NRE Fixed Deposit on Maturity. - Community Forum - GOV.UK (hmrc.gov.uk)

I think Dazed_and_C0nfused is right that in practice, HMRC will, unless we get into an argument with them about a specific tax return, just use what the interest payer reports to them. It's a good idea to get someone knowledgeable at the interest payer (ie not just someone answering a general helpline) to tell you what they report (or are going to report; this might give you a chance to argue against whatever they choose, if you think that will be better for you) each year - this also means that, if HMRC says you've done something wrong, you can say you used the interest payer's figures in good faith.

I also recall a poster on this forum saying NS&I were completely wrong on their interest reporting dates around the beginning of April. I have to say that government organisations do appear to have some strange accounting practices.

So it does pay to check this in advance if it could affect the amount of tax you may need to pay.

Albermarle

RG2015 said:

EthicsGradient said:

RG2015 said:

Dazed_and_C0nfused said:

At the end of the day it will be taxable income of the tax year the interest payer reports it as taxable to HMRC.

If interest was credited to your account each month then I would work on the assumption that the interest is going to be taxed in the tax year it was credited, so the majority will be income of 2022-23.

Does this mean that it is the interest payer, rather than HMRC effectively decide the applicable tax year?

It is rather unsatisfactory and concerning that even a “tax expert” like yourself can only recommend making an assumption.

I also recall seeing contradictory answers on the HMRC helpline from their own agents. There was a post from @EthicsGradient on this some while back.

There had been some contradictory answers from HMRC, but they do now seem to have settled on "taxed at maturity if interest is only available then" (though whether that settles questions about accounts you can change if interest is paid out, I'm not so sure). The details of that are:
First, HMRC Admin 32 said to me it was when you were "notified" of interest that counted - I replied that seemed to contradict the saim2440 manual: Interest on savings - Community Forum - GOV.UK (hmrc.gov.uk)
Then HMRC Admin 2 said it was when the interest could be "accessed"; when I said that didn't seem to match with Admin 32's reply, Admin 32 joined the newer thread, and now said it was access that counted, as saim2440 says: Tax on NRE Fixed Deposit on Maturity. - Community Forum - GOV.UK (hmrc.gov.uk)

I think Dazed_and_C0nfused is right that in practice, HMRC will, unless we get into an argument with them about a specific tax return, just use what the interest payer reports to them. It's a good idea to get someone knowledgeable at the interest payer (ie not just someone answering a general helpline) to tell you what they report (or are going to report; this might give you a chance to argue against whatever they choose, if you think that will be better for you) each year - this also means that, if HMRC says you've done something wrong, you can say you used the interest payer's figures in good faith.

I also recall a poster on this forum saying NS&I were completely wrong on their interest reporting dates around the beginning of April. I have to say that government organisations do appear to have some strange accounting practices.

So it does pay to check this in advance if it could affect the amount of tax you may need to pay.

I also recall a poster saying that with HL active savings, neither HL or the actual savings provider were reporting interest at all. Presumably both thinking the other one should do it.