NS@I 3 year Green Bond 5.7%

Albermarle

auser99 said:

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

There is a distinct possibility the person you talk to will have no idea, or give you the wrong info.
Another provider told a caller that they do not report interest to HMRC at all, although after some internal discussion they corrected themselves.

auser99

An advisor has responded on email saying that interest would only need to be reported once at the end of 3 years.

They've worded that as if I asked as a self assessment question, but sounds about as clear as we're going to get - interest reported on maturity, which is what I was after.

ChilliBob

I was tempted by this - it seems about as close as a 'yes' as we may get on 'is the interest taxable only on maturity' - their website would certainly suggest this, and being NS&I, you'd sort of think they're perhaps 'closer' to HMRC than say Vanquis or something else. Perhaps that's wishful thinking based on the comments above though!

auser99

ChilliBob said:

I was tempted by this - it seems about as close as a 'yes' as we may get on 'is the interest taxable only on maturity' - their website would certainly suggest this, and being NS&I, you'd sort of think they're perhaps 'closer' to HMRC than say Vanquis or something else. Perhaps that's wishful thinking based on the comments above though!

I'll probably stick a couple of k in there and see how it pans out.
Top of the market is about 6% but with absolutely randoms I've never heard of, so 5.7% doesn't feel too much of a step down to go with NS&I

You'd think somewhere along the line of that 3 years inflation is well under 5.7% too (awaits experts telling me that's a foolish thing to say, and that as it's taxable it'd have to be xxx% under this to capitalise anyway etc )  

Albermarle

You'd think somewhere along the line of that 3 years inflation is well under 5.7% too (awaits experts telling me that's a foolish thing to say, and that as it's taxable it'd have to be xxx% under this to capitalise anyway etc )

It is quite possible that in a couple of  years time inflation will be below where you can currently fix interest rates.

There have been periods in the past when cash has beaten inflation, but normally in the long run the only way to beat inflation consistently is to invest.

Regarding tax there are various tax breaks, that can reduce tax on interest, or you can put it in an ISA instead.

Current best 3 year fix ISA rates are 5.55% to 5.65% and not with 'randoms' Providers such as West Bromwich BS , Leeds BS and Aldermore are offering these.

ConsistentlyLost

Hi Folks!

My mum deposited money into these back in February when the rate was 4.2%. Will she get this higher rate of 5.7% or is she stuck at 4.2%? 

Unlike other fixes it seems the money is truly locked away with these as I don't see an option to withdraw/close early and take the hit from a penalty.

Tia

wmb194

ConsistentlyLost said:

Hi Folks!

My mum deposited money into these back in February when the rate was 4.2%. Will she get this higher rate of 5.7% or is she stuck at 4.2%? 

Unlike other fixes it seems the money is truly locked away with these as I don't see an option to withdraw/close early and take the hit from a penalty.

Tia

No, the rate is fixed at the time you open the account.

It must be an issue 4:

https://nsandi-corporate.com/news-research/news/420-green-savings-bonds-issue-4#

auser99

ConsistentlyLost said:

Hi Folks!

My mum deposited money into these back in February when the rate was 4.2%. Will she get this higher rate of 5.7% or is she stuck at 4.2%? 

Unlike other fixes it seems the money is truly locked away with these as I don't see an option to withdraw/close early and take the hit from a penalty.

Tia

Is it not quite rare that fixed bonds give you an "out"?
ISA's by law always give you an out, upon loss of interest, but i'd have thought the vast majority of bonds needs some sort of exceptional circumstance such as death, otherwise going bankrupt etc.

auser99

Albermarle said:

You'd think somewhere along the line of that 3 years inflation is well under 5.7% too (awaits experts telling me that's a foolish thing to say, and that as it's taxable it'd have to be xxx% under this to capitalise anyway etc )

It is quite possible that in a couple of  years time inflation will be below where you can currently fix interest rates.

There have been periods in the past when cash has beaten inflation, but normally in the long run the only way to beat inflation consistently is to invest.

Regarding tax there are various tax breaks, that can reduce tax on interest, or you can put it in an ISA instead.

Current best 3 year fix ISA rates are 5.55% to 5.65% and not with 'randoms' Providers such as West Bromwich BS , Leeds BS and Aldermore are offering these.

This is all on the premise that the ISA route has been maximised.

As a resident expert, and maybe the wrong thread for it, do you know much about salary sacrifice?
Is that simply paying say 10k into it, meaning that figure is taken off your salary, and thus like standard pension contributions this figure isn't taxed?

Or is it only a percentage (maybe 25% I read about something maybe unrelated) that is the tax break?

I'm intrigued as a 60+ year old at work told me he'd paid something like 40k into his pension in 1 year?!

masonic

auser99 said:

Albermarle said:

You'd think somewhere along the line of that 3 years inflation is well under 5.7% too (awaits experts telling me that's a foolish thing to say, and that as it's taxable it'd have to be xxx% under this to capitalise anyway etc )

It is quite possible that in a couple of  years time inflation will be below where you can currently fix interest rates.

There have been periods in the past when cash has beaten inflation, but normally in the long run the only way to beat inflation consistently is to invest.

Regarding tax there are various tax breaks, that can reduce tax on interest, or you can put it in an ISA instead.

Current best 3 year fix ISA rates are 5.55% to 5.65% and not with 'randoms' Providers such as West Bromwich BS , Leeds BS and Aldermore are offering these.

This is all on the premise that the ISA route has been maximised.

As a resident expert, and maybe the wrong thread for it, do you know much about salary sacrifice?
Is that simply paying say 10k into it, meaning that figure is taken off your salary, and thus like standard pension contributions this figure isn't taxed?

Or is it only a percentage (maybe 25% I read about something maybe unrelated) that is the tax break?

I'm intrigued as a 60+ year old at work told me he'd paid something like 40k into his pension in 1 year?!

You can salary sacrifice down to the minimum wage and subject to the annual allowance for pension contributions (currently £60k). This avoids both income tax and national insurance on the pension contributions, so a better deal than you contributing from net income and then getting income tax relief. Should you wish to, you can also contribute to a personal pension up to 100% of your earnings (and the same £60k annual allowance, plus any allowance carried forward from the last few tax years). It can be quite handy to max out pension contributions in your latter working years.