Savings tax

Greenstar62

I'm trying to find a 2 year fixed rate bond to invest £63,000 in.

 I want it to pay interest on maturity - in the second year only - as I'll earn less in 2025-26. I don't want to have to pay tax on the interest in 2024-25. I think this'll save me about £700 in tax but it may not be possible???

eskbanker

You can search for such accounts on Moneyfacts, filtering on two year fixes with interest on maturity.

molerat

https://moneyfactscompare.co.uk/savings-accounts/2-year-fixed-rate-bonds/?id=null&business-type=16&activity-type=null&investment-amount=63000&investment-type=1&account-types=1&interest-paid-frequencies=4&terms=8&account-opening-methods=null&account-management-methods=null&notice-periods=null&include-notice-period=true&include-term=true&age=21&has-withdrawal-restrictions=2&existing-customers-only=2&is-shariaa=2&joint-account-only=2&quick-links-first=false

Greenstar62

I appreciate the money facts link - I didn't know about the website.

However, even the bonds that state "interest on maturity" seem to credit interest daily or annually and imply that tax would need to be paid for interest on the first year. 

Is there any other way round this? 

Bigwheels1111

As above look at money facts, on the 2 year page click view further details on each account.
JN Bank 5.8% say Interest Paid Anniversary

Interest Payment Interest must be compounded, so might get taxed on year one and two.

But, Union Bank of India 5.8% say Interest Paid On Maturity.
I would understand that to mean in year 2 only.

Paid On Maturity is the main term to look for. Not 100% sure.
Give the bank your interested in a call to confirm.

Olinda99

I am fairly sure ns&i pay all interest on their bonds at maturity

Kim_13

Take a look at this thread: https://forums.moneysavingexpert.com/discussion/6483922/when-you-pay-tax-on-savings-just-spoken-to-hmrc/p1

I suspect Castle Trust Bank have written what they have to cover themselves as they don’t really understand the tax treatment. The consensus from the thread is that as it is in HMRC’s own manual that interest is only taxable when it is accessible, you can opt for a bond with interest only accessible on maturity and contact HMRC to have any inaccessible interest removed from your annual tax calculation. Probably more easily sorted if you can find a bond that doesn’t credit inaccessible interest annually and applies it all at the end.

Greenstar62

Olinda99 said:

I am fairly sure ns&i pay all interest on their bonds at maturity

You're right- it's the first time I've seen this on a website: it says it is taxable in the year your bond matures. Thank you for signposting that.