Monthly Paid Away v Annual Interest

SickGroove

Good evening,

Just want to clarify, I've currently got 3 fixed rate Cash ISAs totalling 90K with all the interest on those current being paid away monthly, so these paid away amounts are of no interest to HMRC I believe?

I'm now looking at putting 70K savings split equally (£35K) into a 1 & 2 year fix, again with interest paid away monthly. Obviously on these accounts I'm liable to pay tax on the interest. 

My question is if I did that this month for both fixes, would the tax I have to pay be split between 23/24 & 24/25 tax years for the 1 year with the 2 year fix be split between tax years 23/24 24/25 & 25/26?

However, If I just went for an annual interest option on both a 1 & 2 year fix with Oxbury (£35K in each) all the interest would be payable on the 1 year fix in 24/25 tax year & for the 2 year fix in 25/26 tax year so i would still be well under the 10K taxable limit in both years - am I understanding this correctly?

I'm a basic rate tax payer & believe I don't need to inform HMRC or fill in a self assessment form as I'll still be earning far less than the 10K limit on my taxable income...is that correct? 

Dazed_and_C0nfused

Providing you stick to the rules HMRC aren't interested in interest from cash ISA's.

10K taxable limit 

I think you've invented something there.  All interest from non ISA accounts is taxable.  

But if you don't meet any other criteria for Self Assessment then £10k is the point at which HMRC want you to register and complete tax return.

The interest will be taxed in the tax year the provider reports it against.  Which is normally the tax year interest is credited to your account.

Do Oxbury pay interest on the 2 year fix just once, at the end of the term? 

masonic

If the interest cannot be accessed until maturity, then that would be when it would become taxable and when you should report it on a tax return. If paid away, it is always taxable when paid. Most people are better off spreading the tax liability over multiple tax years, so the pay away option tends to be more attractive on a multi year fix.

If you won't need to do a tax return, then providers always report interest when credited to the account, and HMRC won't be aware if it isn't accessible, so will not treat it correctly for tax.