When should profit (interest) from a saving account be reported to HMRC via Self Assessment

Dazed_and_C0nfused

polyphonic99 said:

Hi, a final update on this (thanks MSE for keeping this post live).

polyphonic99 said:

Hi,

In November 2023 I took out an 18 Month fixed rate bond with Al Rayan bank that was due to mature in May 2025. The profit (its an Ismalic based account, so its profit not interest) is due to be paid to me at maturity in May 2025. To my surprise however,  I have received a Profit Satement from Al Rayan saying that they have internally credited Profit to the account in February 2024, and they were going to do so every 3 months for the 18 month term. There was no mention of this when i took out the bond. There were 2 options: take profit quaretely or receive profit 18 months later at maturity. I chose the latter.

Simple question: do I have to report the interim 3 month profit (that I have been credited with, but won't receive until May 2025) to HMRC for my 2023/24 Self assessment tax return, or can I wait and roll it all up and report it all on my 2025/26 tax return when I the bond matures and I actually receive the profit?

I have already asked Al Rayan, who say they can't give me any tax advise, and have told me to phone up HMRC for the next 6 month.

Thanks for your advise.

I complete an annual Self Assessments with HMRC, and have been doing so since SA was introduced in 1997. 

When I submitted my SA Form in December 24, I explained the above scenario to HMRC, in the SA100 form comments box, and an attached Balancing Payments Appeal document. I pointed out that I had not yet received my capital back nor any interest/profit, and that I believed I was not due to pay any tax on the interest/profit until I actually received the interest/profit in the 25/26 tax year, when the bond matured. However, I told them that if my understanding of the situation was incorrect, I would pay the tax due straight away, within the 23/24 Tax year. 

HMRC response was to agree with me, and confirmed that the tax only needs to be reported for the tax year when I receive the profit/ interest. 

Al Rayan's internal accounting is irrelevant, because I receive no benefit until the bond matures in May 2025. Therefore I have to declare it as income for the 25/26 tax year, complete the SA tax return and pay the tax due before 31 January 2027.

To be honest, Al Rayan, and any other bond provider that offers products that pay out at maturity should know this, and be able to tell their customers when asked.

I hope this helps anyone else who find themselves in a similar situation.

No idea what a Balancing Payments Appeal document is, to be honest it sounds like something you have made up!

But are you saying you included a white space note on your return.  You submitted the return in December 2024 and by early February 2025 you have received a written letter in response?

There will be a lot of jealous people if you have as that is super fast by HMRC's current standards!

Or do you mean you received an SA302 tax calculation?

polyphonic99

No idea what a Balancing Payments Appeal document is, to be honest it sounds like something you have made up!
But are you saying you included a white space note on your return.  You submitted the return in December 2024 and by early February 2025 you have received a written letter in response?
There will be a lot of jealous people if you have as that is super fast by HMRC's current standards!
Or do you mean you received an SA302 tax calculation?

This issue was about Al Rayan not correctly informing customers of when the tax liability is due. In this case for a fixed term bond that only pays out the accrued interest at maturity, in the 25/26 Tax year. HMRC declined to ask me to pay the tax on the sums Al Rayan had assigned internally, but not paid to me, in the 23/24 tax year, which is the offer I made to HMRC, if that was what was stated in law. Therefore one must conclude that the tax is due in 2025/26.

However in response to your comments:

I complete my self-assessment online. In April 2015, Marriage Allowance Transfer was introduced. In April 2016 savings interest was changed so that it was paid gross by Banks and Buildiing Societes and the tax payer was left to declare and pay for it in self assessment. Neither of these changes were handled correctly in the online self-assessment System, which didn't deduct the MAT tax allowance from the tax due calculations when you filled in the online version of the self-assessment form. So unless you challenged the incorrect tax calculation you had to pay more tax than you were liable to; reclaim the overpayment at a later date and get a rebate, possibly months later. I like to pay the correct amount of tax in the first place and do more interesting things with my time.

The overcharging that occurs in the 'View your calculation' section 6 of the online self-assessment form, not the 'SA302', is printed right at the bottom of the calculation, above the total. It shows the tax year (eg 2023-24) and the text 'BALANCING PAYMENT', and for me, then shows the amount of saving interest that I am due to pay after taking into account the savings allowance. However, the calculation never includes the deduction of the MAT tax allowance. So before I submit my completed self-assessment I just write a polite letter, in response to their erroneous 'BALANCING PAYMENT' figure, logically, in my mind, calling it 'Balancing Payment Appeal.pdf', thus directing HMRC staff to the problem area in the calculation, stating that the HMRC calculations are incorrect, why they are incorrect, stating what the actual tax due should be, making a reference that this error has been ongoing since 2016, that it was a waste of HMRC reources to process necessary rebates, and then asking them to send me an accurate tax calculation so that I can pay the correct tax by 31 January. I invariably get a response from HMRC within 2 to 4 weeks, confirming my calculations, though the delay could be down to the Christmas post. This has been happening every year since MAT was introduced.

I don't fill in any 'white space' free form comment sections on the self-assessment form, but you can attach up to 10 pdf files to your online self-assessment. I should imagine part of the HMRC process will have to include reading any attachment to the self-assessment form before they can complete the processing of the submission, and perhaps that is why I get a quick response.

My self-assessment submission date was 03/12/2024, HMRC response was dated 05/12/2024, 2 days later, and included some free form comments and the corrected tax calculation on a SA302 that addressed the 3 issues that I had raised this year: Al Rayan, if Al Rayan tax were due in 23/24 its impact on the amount of CGT that I owed (it would have pushed some of the CGT into the higher tax rate), and the annual MAT issue. I received HMRC's response in the post on 06/01/2025, not February.