Personal Savings Allowance when reinvesting?

irelavv

Hello guys. I wanted to ask something regarding triggering Personal Savings Allowance at account maturity date. Here's my situation:

• Opened a savings account with SmartSave bank last year and account is due to mature on 2 April;
• I am a basic rate taxpayer so am allowed the yearly £1000 PSA;
• Looking to reinvest my initial deposit plus interest with SmartSave at 5.28% for 1 year (approx. £10k). But also wanting to add a further £8k-£9k to that when my first savings account matures and am allowed a 14-day funds transfer window for the new account

So, am I correct to assume that the first savings account maturity date falls within this year's PSA and reinvesting the money, plus additional cash would count towards next year's PSA? I am doing this as I'd like to max out 24/25 PSA.

I am only asking because I would not technically have chosen to have access to my accrued interest on 2 Apirl 2024 but rather reinvested it straight into a new savings account. It worries me that the initial interest plus newly accrued interest would maybe be counted towards next year's PSA and would therefore put me above the allowance, making me liable for tax? 

I've tried contacting SmartSave but they've said they can't comment as they're not financial adcisors. Anyways, thanks for your help in advance!

PS: I know a simple solution to this would be to choose to have my initial deposit plus interest be transferred to my personal banking account, and then opening a new savings account with SmartSave. But it is so much easier and hassle-free to lock in the new account by reinvesting the funds directly and I wouldn't lose any days accruing interest...

Dazed_and_C0nfused

Really all that matters is which tax year the interest is reported to HMRC for.

Which will almost certainly be based on the date it is added to your account.

InvesterJones

irelavv said:

Hello guys. I wanted to ask something regarding triggering Personal Savings Allowance at account maturity date. Here's my situation:

• Opened a savings account with SmartSave bank last year and account is due to mature on 2 April;
• I am a basic rate taxpayer so am allowed the yearly £1000 PSA;
• Looking to reinvest my initial deposit plus interest with SmartSave at 5.28% for 1 year (approx. £10k). But also wanting to add a further £8k-£9k to that when my first savings account matures and am allowed a 14-day funds transfer window for the new account

So, am I correct to assume that the first savings account maturity date falls within this year's PSA and reinvesting the money, plus additional cash would count towards next year's PSA?

The interest on maturity would count towards this year's PSA, and the interest from reinvesting it (i.e. the interest on the interest) would count towards next year's.

I am doing this as I'd like to max out 24/25 PSA.

I am only asking because I would not technically have chosen to have access to my accrued interest on 2 Apirl 2024 but rather reinvested it straight into a new savings account. It worries me that the initial interest plus newly accrued interest would maybe be counted towards next year's PSA and would therefore put me above the allowance, making me liable for tax? 

The fact you are able to reinvest the matured account (or do something else with it) suggests it's available to you in this tax year, and for the next only the interest available in the new tax year counts.

irelavv

Thanks guys. I've reinvested the cash