NS@I 3 year Green Bond 5.7%

auser99

This actually looks vaguely competitive for once by NSI's standards.

Does anyone know if the quoted interest upon the 3 year maturity is actually paid and thus quoted to HMRC upon 3 years, or do they report it annually like a lot of banks seem to?
The rule is meant to be when you can "access" the interest, but it seems a slight gray area.

Has anyone had one of the previous Green 3 year bonds, and is at least 1 year in to know for certain?

jaypers

Is the interest taxable?   Yes, in the tax year your Bond matures

i would surmise from this that all interest is paid at the end of the 3 year period. For this reason, I don’t think it’s reported annually. 

wmb194

jaypers said:

Is the interest taxable?   Yes, in the tax year your Bond matures

i would surmise from this that all interest is paid at the end of the 3 year period. For this reason, I don’t think it’s reported annually. 

It's better to know than to guess: "We calculate the interest daily and add it to your Bond on each anniversary of your investment."

https://www.nsandi.com/products/green-savings-bonds

FatFred66

wmb194 said:

jaypers said:

Is the interest taxable?   Yes, in the tax year your Bond matures

i would surmise from this that all interest is paid at the end of the 3 year period. For this reason, I don’t think it’s reported annually. 

It's better to know than to guess: "We calculate the interest daily and add it to your Bond on each anniversary of your investment."

https://www.nsandi.com/products/green-savings-bonds

That makes no difference to the tax situation unless you're able to draw the interest from the bond as it's credited. If not then it's taxed in the year the bond matures.

FatFred66

From the HMRC manual: https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Example 2

Sam entered into a five year fixed-term bond on 6 April 2017. The bond credits interest to Sam’s account annually on the 31 December. Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

If the terms and conditions of the bond did not allow access until maturity, the interest would arise and be taxed at that point.

Albermarle

FatFred66 said:

From the HMRC manual: https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Example 2

Sam entered into a five year fixed-term bond on 6 April 2017. The bond credits interest to Sam’s account annually on the 31 December. Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

If the terms and conditions of the bond did not allow access until maturity, the interest would arise and be taxed at that point.

Regarding the comment in bold.
As discussed in numerous past threads, although this is the HMRC policy, many providers report the interest annually to HMRC, even when it is not accessible.
In this case it seems HMRC just treat it as annual interest for tax purposes. Probably they have no time or inclination to investigate the T's & C's of every account reported to them.

Does anyone know if the quoted interest upon the 3 year maturity is actually paid and thus quoted to HMRC upon 3 years, or do they report it annually like a lot of banks seem to?
The rule is meant to be when you can "access" the interest, but it seems a slight gray area.

OP - You are right it is a grey area, but I have some memory of reading somewhere that NS&I only report the interest to HMRC on maturity ( even though they add it annually). You could try asking them but previous attempts to get some clarity from providers on this issue has proved difficult.

wmb194

FatFred66 said:

wmb194 said:

jaypers said:

Is the interest taxable?   Yes, in the tax year your Bond matures

i would surmise from this that all interest is paid at the end of the 3 year period. For this reason, I don’t think it’s reported annually. 

It's better to know than to guess: "We calculate the interest daily and add it to your Bond on each anniversary of your investment."

https://www.nsandi.com/products/green-savings-bonds

That makes no difference to the tax situation unless you're able to draw the interest from the bond as it's credited. If not then it's taxed in the year the bond matures.

Yes, I realise*. I was responding to a specific assumption.

*Well, that's the theory...

ab56

Remember parents having N S & I 'granny bonds' a few years ago - the interest was not accessible until maturity.  There was a lot of comments in the press at the time as tax was due each year (if eligible to pay tax) on the annual inaccessible interest.  My parents reported the interest annually on their ITRs.  

auser99

ab56 said:

Remember parents having N S & I 'granny bonds' a few years ago - the interest was not accessible until maturity.  There was a lot of comments in the press at the time as tax was due each year (if eligible to pay tax) on the annual inaccessible interest.  My parents reported the interest annually on their ITRs.  

Thanks, this is exactly why I ask the question.
Some of the multi year bonds on the MSE table say they pay on maturity but in the terms it suggests it's actually annually, and thus HMRC reporting takes place then.

Yet the "theory", as some mention above, is that it's on being able to access interest, which you technically can't.

The only multi year bonds I've ever done I set to monthly, but I could do with shifting the whole of the interest to a few years in future, so would go for this one IF we're certain either way

auser99

Albermarle said:

FatFred66 said:

From the HMRC manual: https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Example 2

Sam entered into a five year fixed-term bond on 6 April 2017. The bond credits interest to Sam’s account annually on the 31 December. Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

If the terms and conditions of the bond did not allow access until maturity, the interest would arise and be taxed at that point.

Regarding the comment in bold.
As discussed in numerous past threads, although this is the HMRC policy, many providers report the interest annually to HMRC, even when it is not accessible.
In this case it seems HMRC just treat it as annual interest for tax purposes. Probably they have no time or inclination to investigate the T's & C's of every account reported to them.

Does anyone know if the quoted interest upon the 3 year maturity is actually paid and thus quoted to HMRC upon 3 years, or do they report it annually like a lot of banks seem to?
The rule is meant to be when you can "access" the interest, but it seems a slight gray area.

OP - You are right it is a grey area, but I have some memory of reading somewhere that NS&I only report the interest to HMRC on maturity ( even though they add it annually). You could try asking them but previous attempts to get some clarity from providers on this issue has proved difficult.

Thanks I'll see if there's an easy way to ask them bar having to hang on and phone

cricidmuslibale

If the Government genuinely want to encourage as many people as possible to save into ‘green’ savings accounts, in other words to lend their capital to the Government for ‘green’ projects and investments, would it not be a good idea for NS&I to also sell Green Savings Certificates from time to time, with an investment limit of say £10k to £15k per issue, where all interest earned is tax free?! (The interest rate in this case would be set at a similar level to Fixed Rate ISAs of the same term length but not the very highest paying ones.)

Alternatively, NS&I could directly link the tax free returns on any Green Savings Certificates to inflation (preferably as measured by the Retail Price Index) and thus create “new” Index Linked Green Savings Certificates for us to save our money within. Now that would definitely encourage many people to support with their savings - i.e. lend a considerable amount of money towards - green projects and investments!