Fidelity - taxing interest outside ISA?

Sea_Shell

DH holds some cash in his Fidelity Cash Management Account to pay the fees on his S&S ISA.

This earns some interest.   However, they also appear to be deducting tax from the interest at source, rather than paying it gross.   

It's only pennies, but I thought all interest is paid gross these days.

DH is well within any tax from interest allowances.

Anyone else noticed this?   Should they be deducting it?

eskbanker

https://www.fidelity.co.uk/statutory-and-regulatory-disclosures/how-we-manage-your-cash/ does say:

• Where HMRC requires, the interest will be paid net of basic rate tax. This would be in the case of interest paid into our Investment Accounts and Cash Management Account. Interest in ISAs and SIPPs are paid gross.

but it's not clear to me that this genuinely is an HMRC requirement as such.

Albermarle

I was not aware of that. Maybe someone should query that with Fidelity ?

Maybe it is because they are not a savings provider, there is no mechanism for them to report this interest to HMRC ?

ColdIron

I got 14 pence of interest from HL in my Fund and Share account 2022/23. I didn't have tax deducted so declared it via my self assessment because that's the kind of chap I am

Sea_Shell

Maybe he should ask for it back at the end of the tax year🤣🤣.    

I assume, technically, HMRC would owe him it back.

Do they have a lower threshold for tax refunds? 🤔

Would it eventually come out in the wash, as it were?

jacksonreed003

I think tax may be deducted at the source even if DH holds cash in his Fidelity Cash Management Accounts and also earns interest. DH should check his tax situation and account terms to understand why tax is deducted and if it's correct.

Hoenir

Possibly something to do with not being a regulated / licenced deposit taker. Fidelity have taken the easiest route of reporting to the HMRC i.e. when interest is credited. All will come out in the wash at the year end tax reconcilation. . 

wmb194

Albermarle said:

I was not aware of that. Maybe someone should query that with Fidelity ?

Maybe it is because they are not a savings provider, there is no mechanism for them to report this interest to HMRC ?

Fidelity is just another stockbroker/ funds platform. None of my myriad brokers and platforms deduct tax on interest paid on cash held with them.

Notepad_Phil

Sea_Shell said:

...
Anyone else noticed this?   Should they be deducting it?

Mrs Notepad has some money in the Santander Investment Hub and that also takes the tax from any interest she gets from cash in the account - 1p from 5p of interest on her last statement. Would be nice if every platform was consistent on this, but she's not too concerned as she reckons that it should be sorted out at reconcilation time.

Sea_Shell

I've just logged on and downloaded all the transactions for the current tax year, and filtered it.

It only shows Interest as been paid for Aug, Sept, Oct, WITHOUT tax deducted, but Nov, Dec and Jan have had tax deducted.   Nothing for April to August!  

Strange!

So far this tax year, he's earned the grand sum of 99p interest, and had a total of 24p of tax deducted in respect of the last 3 months.  

I did the same thing for the last tax year 22/23, and its not showing any interest at all, taxed or not.   I can't remember when they started to pay interest on cash in the CMA.

He's always kept a small cash balance in the CMA to pay fees, and the fees have been coming out (and we've topped it up every 6 months or so) 

Sea_Shell

Hoping to make sense of the numbers this month, as in another thread, it was said that the tax is shown, but not actually deducted!

Since the last interest was added, 6/3/24, his CMA balance was/is £267.00.     I believe that the interest rate is 3.6% (AER of 3.66% ?)

So what interest should be received gross/net, any day now?    Will this be for the 31 days of March 24?  

Not so much bothered about the amounts, just want to understand what's going on.