When you pay tax on savings, just spoken to HMRC

Ocelot

Ozzig said:

intalex said:

I guess the rule is what it is,

Genuinely, what is it? 

We have Ben's update, reinforcing the advice on the MSE savings pages. But if I call HMRC and get the same agent I spoke to originally, would referring him to Ben's update be deemed enough to change his answer to my original question? 

Or when MSE checked with HMRC if they got through to the agent I spoke to, would their page have been updated? 

There should be clear advice in the HMRC guidelines, which is communicated to all their advisors, on the phone, on the help forum and everywhere in between.

Tax will always be a minefield, but there are hundreds of fixed-term products in the marketplace, that normally have very clear terms about if the interest is or is not accessible until maturity. HMRC needs to be clear about when the earned interest should be declared.

As I posted earlier in this thread, I've been paying extra tax every year after exceeding the PSA for the last 6 years, through multi-year FRBs, despite not having access to the credited interest. This seems to be the norm. I've had my tax code altered more times during that time than I've had hot dinners, and it's difficult to confirm the accuracy of their calculations. 

If there is no option other than to have the interest paid at maturity (relatively unusual, but still happens) the situation may be different.

HMRC and MSE appear to be generally incorrect in their advice on this subject.

masonic

Ocelot said:

Ozzig said:

intalex said:

I guess the rule is what it is,

Genuinely, what is it? 

We have Ben's update, reinforcing the advice on the MSE savings pages. But if I call HMRC and get the same agent I spoke to originally, would referring him to Ben's update be deemed enough to change his answer to my original question? 

Or when MSE checked with HMRC if they got through to the agent I spoke to, would their page have been updated? 

There should be clear advice in the HMRC guidelines, which is communicated to all their advisors, on the phone, on the help forum and everywhere in between.

Tax will always be a minefield, but there are hundreds of fixed-term products in the marketplace, that normally have very clear terms about if the interest is or is not accessible until maturity. HMRC needs to be clear about when the earned interest should be declared.

As I posted earlier in this thread, I've been paying extra tax every year after exceeding the PSA for the last 6 years, through multi-year FRBs, despite not having access to the credited interest. This seems to be the norm. I've had my tax code altered more times during that time than I've had hot dinners, and it's difficult to confirm the accuracy of their calculations. 

If there is no option other than to have the interest paid at maturity (relatively unusual, but still happens) the situation may be different.

HMRC and MSE appear to be generally incorrect in their advice on this subject.

What you are describing is incorrect taxation of your interest, but it has probably worked in your favour. It may catch up with you in the future, or it may not. With the passing years, proof that interest wasn't accessible in the specific accounts you held becomes more and more difficult to obtain.

HMRC and MSE are correct about what should be happening, but it isn't happening unless the taxpayer intervenes.

DavidAC

So the year interest is taxed on ns&I green bond and df capital fixed paid at maturity are pot luck depending on the opinion or mood of the tax inspector who deals with it.

masonic

DavidAC said:

So the year interest is taxed on ns&I green bond and df capital fixed paid at maturity are pot luck depending on the opinion or mood of the tax inspector who deals with it.

No. Interest credited at maturity is always taxed at maturity. There is no other possibility. It is only interest credited in the years before maturity that can give rise to the wrong tax treatment.

DavidAC

Df taxed only at maturity then. Ns&I say in the tax year your bond matures but also say added annually. Maybe because interest is not accessible until maturity it is only taxed at maturity.

masonic

DavidAC said:

Df taxed only at maturity then. Ns&I say in the tax year your bond matures but also say added annually. Maybe because interest is not accessible until maturity it is only taxed at maturity.

If interest is added annually, then it must be reported to HMRC annually, and HMRC will assume it will be available and tax it accordingly (because it is pointless to credit inaccessible interest). So NS&I could be a problem for you, and you would need to get in touch with HMRC if you won't be completing a tax return in the affected years. You would just need to provide them with details of all of the interest you have received for the tax year in question, and which accounts had interest credited which wasn't accessible. Those amounts would then need to be carried forward and added to your total interest for the year of maturity.

Ozzig

masonic said:

The rules are clear, most of the confusion comes from disbelief that they are what they are. How someone can be compliant with the rules, on the other hand, is a major challenge. HMRC can't even get it right.

If the rules were clear all the HMRC advisors would give the same answer every time, it would match the formal answer MSE Ben received and all the anecdotal evidence posted here would be the same across the board.

I can understand the arguments for taxing them either way, from the treasury and the consumer's perspective.
I'm happy to plan based on whatever the rules are and pay the tax as applicable.

Whilst they are giving two answers to the same question, I want to apply the answer that makes me better off. 

DavidAC

I have missed the NS&I Green Savings at 5.7% partly due to trying to determine when interest is tax. It was pulled today, new issue 3.95%. That is some drop. I hope DF accept the18 month loyalty fix that I applied for yesterday at 5.95%. Seemed to go through but not showing this morning.

Ozzig

MSE_Ben_T said:

Good afternoon, 

Just responding to requests for a confirmation of the validity of the info on our PSA page / of HMRC's official line on this matter. We have been in contact with HMRC multiple times on this issue in the past, and again in this instance, and they have always confirmed that our advice is correct, and that it's when you can 'access' your interest that matters. 

Therefore, if you have a fixed-rate savings account longer than a year, and choose for interest to be paid at maturity (or if you choose to have monthly or annual interest paid into the fixed savings account), then all that interest is counted towards the final year's PSA. 

Hope this helps, 

MSE Ben

Hi MSE Ben, 

A question I should have asked when you first replied, can / do the HMRC give you guys a reference number or the like that we can use when we speak to them as precedence?

Thanks.

masonic

Ozzig said:

masonic said:

The rules are clear, most of the confusion comes from disbelief that they are what they are. How someone can be compliant with the rules, on the other hand, is a major challenge. HMRC can't even get it right.

If the rules were clear all the HMRC advisors would give the same answer every time, it would match the formal answer MSE Ben received and all the anecdotal evidence posted here would be the same across the board.

I can understand the arguments for taxing them either way, from the treasury and the consumer's perspective.
I'm happy to plan based on whatever the rules are and pay the tax as applicable.

Whilst they are giving two answers to the same question, I want to apply the answer that makes me better off. 

In my experience they have given a consistent answer for all scenarios they have understood. Can you provide evidence that they have told you or another taxpayer that interest should be taxed in a year other than when it arises, or that interest that was credited but inaccessible until maturity arises before then?