Tax and savings

tinsy

I have recently semi retired and with my lump sum and other savings have just exceeded the tax limit of £1000. Am I right in thinking putting money in a 2 year fixed account, the interest will be counted in the year it matures? Will be putting some of lump sum in an ISA and also add to premium bonds

eskbanker

Theoretically the interest is only counted at maturity if that's when it's added to the account, but in practical terms it seems to depend on when the provider chooses to report it to HMRC.

Albermarle

Am I right in thinking putting money in a 2 year fixed account, the interest will be counted in the year it matures? 

As above it is a grey area. When you choose a product have a good look at the T's & C's, although no guarantee that will bring much clarity on this issue.

[Deleted User]

Hi,

just had a look at Moneyfacts 2 year fix, interest is paid yearly on anniversary or on maturity, so, as above check T&Cs.

Notepad_Phil

And even if you think that the T&C's mean that you'd be covered, then unless it was absolutely clear and written in black and white then I would personally then contact the provider to get their confirmation that they will only report the information once at maturity rather than on an annual basis.

JGB1955

I've always assumed that interest is paid annually, and reported it that way.  No unexpected surprises then.

Notepad_Phil

JGB1955 said:

I've always assumed that interest is paid annually, and reported it that way.  No unexpected surprises then.

I think that's because most accounts will do it that way - you'd be in for a potentially expensive surprise if you had e.g. taken out a 5 year account and then found out that you had 5 years of interest paid in one go at maturity.

To be completely sure I only use multi-year accounts that allow me to pay the interest out on an annual basis, and then make sure I choose that option.

JGB1955

Notepad_Phil said:

JGB1955 said:

I've always assumed that interest is paid annually, and reported it that way.  No unexpected surprises then.

I think that's because most accounts will do it that way - you'd be in for a potentially expensive surprise if you had e.g. taken out a 5 year account and then found out that you had 5 years of interest paid in one go at maturity.

To be completely sure I only use multi-year accounts that allow me to pay the interest out on an annual basis, and then make sure I choose that option.

I now have my interest paid monthly so I know EXACTLY where I am.