Fixed term accounts, Monthly, Annually or at Maturity

Worried_of_wakefield

Albermarle said:

Worried_of_wakefield said:

Didn't know that Albermarle, thanks, however given that 2 x 55k 5yr accounts paid at maturity will in year 5 exceed £18750, so back to my OP, should she go for the annual option and whats the reason for it

There have been many threads on this issue and there is a bit of a grey area.
In theory if the interest is not available to withdraw until maturity , then it should be taxed on maturity.
However if the provider adds on the interest annually, and reports that to HMRC annually then it will be taxed annually, even if it is not available to withdraw. There have been conflicting messages from HMRC, and if you ask the savings provider call centre they do not seem to know.
The consensus seems to be if the interest is added annually, then it will be taxed annually, but I wouldn't bet my life on it.

Agree, rang them today, didn't get a straight answer

Worried_of_wakefield

Probably getting too deep for my pea size intellect! however........

RCI - £55k @5.8% for 5yr fixed term interest paid at maturity = £17,910.66 interest
Recognise - £55k @ 6.05% 3 yr fixed term interest paid at maturity = £10,598.62 interest

As they mature in different tax years does this work or is it wishful thinking

Doctor_Who

Worried_of_wakefield said:

Probably getting too deep for my pea size intellect! however........

RCI - £55k @5.8% for 5yr fixed term interest paid at maturity = £17,910.66 interest
Recognise - £55k @ 6.05% 3 yr fixed term interest paid at maturity = £10,598.62 interest

As they mature in different tax years does this work or is it wishful thinking

Yes, if you can spread the interest over 2 tax years and stay under £18,570 each tax year there won't be any tax to pay (as long as there's no other income).

Albermarle

Worried_of_wakefield said:

Probably getting too deep for my pea size intellect! however........

RCI - £55k @5.8% for 5yr fixed term interest paid at maturity = £17,910.66 interest
Recognise - £55k @ 6.05% 3 yr fixed term interest paid at maturity = £10,598.62 interest

As they mature in different tax years does this work or is it wishful thinking

Although as said, if the interest is added annually you might well find that the interest is counted in that tax year, and not all at maturity, even though you only have access to the interest at maturity.

Worried_of_wakefield

Albermarle said:

Worried_of_wakefield said:

Probably getting too deep for my pea size intellect! however........

RCI - £55k @5.8% for 5yr fixed term interest paid at maturity = £17,910.66 interest
Recognise - £55k @ 6.05% 3 yr fixed term interest paid at maturity = £10,598.62 interest

As they mature in different tax years does this work or is it wishful thinking

Although as said, if the interest is added annually you might well find that the interest is counted in that tax year, and not all at maturity, even though you only have access to the interest at maturity.

Thats good then isnt it Albermarle? if the interest is spread over 5yr ( as far as reporting is concerned) then year 5 is 'just another year.' 
even year 3, £10,598.62 +£3,777.88 is still under the £18,570 you've informed me of.

Dazed_and_C0nfused

Worried_of_wakefield said:

Albermarle said:

Worried_of_wakefield said:

Probably getting too deep for my pea size intellect! however........

RCI - £55k @5.8% for 5yr fixed term interest paid at maturity = £17,910.66 interest
Recognise - £55k @ 6.05% 3 yr fixed term interest paid at maturity = £10,598.62 interest

As they mature in different tax years does this work or is it wishful thinking

Although as said, if the interest is added annually you might well find that the interest is counted in that tax year, and not all at maturity, even though you only have access to the interest at maturity.

Thats good then isnt it Albermarle? if the interest is spread over 5yr ( as far as reporting is concerned) then year 5 is 'just another year.' 
even year 3, £10,598.62 +£3,777.88 is still under the £18,570 you've informed me of.

Given you said this in your op is £18,570 actually relevant or should you be using £17,310?

If your wife has applied for Marriage Allowance her Personal Allowance will be £11,310 rather than £12,570.


My wife, who does not work nor pays income tax until state pension kick in ( 8yrs time) is planning to open a couple of fixed term accounts, probably 5yr and keeping beneath the FSCS protection limit say £55k in each

Worried_of_wakefield

If your wife has applied for Marriage Allowance her Personal Allowance will be £11,310 rather than £12,570."

she likely has, thanks I'll check

"probably 5yr and keeping beneath the FSCS protection limit say £55k in each"

This changed half way down the thread, to 1 x 5yr and 1 x 3yr, once / if clarity is recieved regarding the tax implication then possibly revert back. bottom line is we would like the benefit of compounding without the tax burden.

Worried_of_wakefield

You guys are right, this subject is causing a lot of people headaches, 6 month thread on the HMRC forum.

still think a 5yr plus 3yr split may help matters