Accurately declaring interest on tax return

blackdst

Hello all, first time poster but can see there are many knowledgeable people abound who might be able to advise a first time self-assessor!

I'm in the process of completing my tax return and need to enter my BBSI interest. An issue I'm having is that the amounts on my 23/24 certificates of interest are not an accurate reflection of the tax rules, I've read a few threads and can see this is something people here have discussed before. 

The reason I say that the amounts are not accurate is as follows:

I had two 12 month fixes that crossed over from 22/23 to 23/24. While the interest was paid monthly in both cases, it was also only accessible on maturity which from my understanding means that all of that interest should be 'taxable' in 23/24.

However, looking at my 22/23 tax summary on HMRC and the 23/24 certificates of interest from the institutions themselves, this clearly hasn't happened and the simpler method of the year it was applied to my account is the year it appears on the certificate has been used.

My question is, do I need to account for this and re-calculate these amounts for the self assessment or is it acceptable to enter the figures that have been provided by the banks, even though I know they aren't strictly in keeping with the taxable interest rules? 

Thanks so much in advance for anyone who takes pity on me and tries to help

mebu60

Most institutions (bar NS&I I think) seem to report the interest when paid whether accessible or not. I report interest 'received' in the tax year it's credited to my account, whether or not I can access it. At least it's a consistent approach. If HMRC queried anything I'm sure I'd enjoy wading through their figures correcting things and pointing out where tax had been paid already in an earlier year. 

Bigwheels1111

I report the interest in the year it was added also.

But I set up most of my savings to pay out annually to avoid these issues.

Principality reg saver is the odd one out as is a 24 month issue.

If I get interest in December I will add it to this year even though I cant access the interest.

Filled mine on the 16/04/24.

I keep exact records, down to the penny.

I print out certificates of interest, Plus take screen shots just in case they do not match up.

Keep_pedalling

If it was being paid monthly then the certificates are correct, HMRC are not interested in the accessibility rules of the account. 

blackdst

Thanks very much to you all for your replies.

 Keep_pedalling said:

If it was being paid monthly then the certificates are correct, HMRC are not interested in the accessibility rules of the account. 

This stood out for me. If HMRC are not interested in that sense, what is the point of the 'rule' (or whatever we're calling it)?

The reason I'm particularly keen to get this right is three-fold. How I declare this is the difference between being a basic-rate and higher-rate tax payer, being owed tax vs. owing tax, plus qualifying for the high income child benefit charge.

If I declare as per the statements (2023/24 interest of approx. £515 total), my adjusted net income is about 20£ less than £50,000 (phew) which means I'm a basic rate tax-payer, no high income CB charge, a PSA of £1000 (therefore no tax on interest due) and am probably owed a small amount of of money due to HMRC incorrectly classifying me as a higher rate tax payer and taxing me to that effect.

If I declare as per the supposed 'rules' (2023/24 interest of approx. £940), my adjusted net income comes to roughly £50,400 meaning I'm higher rate tax payer, £500 PSA (with 20% owed on the interested earned above that) plus CB high income charge (albeit a very small one).

Could going down the former route land me in any hot water?

Keep_pedalling

The banks impose the rules about access, although usually often you can withdraw the money but with penalties applied and on some accounts you can opt to have interest paid to another account allowing you to access the interest but not the capital. 

Just declare the amount of interest on the statements, you wiping be in trouble for doing so.

EthicsGradient

Keep_pedalling said:

The banks impose the rules about access, although usually often you can withdraw the money but with penalties applied and on some accounts you can opt to have interest paid to another account allowing you to access the interest but not the capital. 

Just declare the amount of interest on the statements, you wiping be in trouble for doing so.

I don't think that's true - 12 month fixed rate accounts are usually precisely that - fixed, without options to "withdraw but with penalties". And the OP says nothing about such penalties. 

Yes, if the interest is paid to another account, then it's accessible, and if that's monthly, then each payment is taxable in its tax year. But if (and I'd add I've never had one of these personally) it's a fixed-rate account that shows new interest each month, but that interest is inaccessible, then HMRC's rules say it should not be entered as taxable income until the year that it is accessible. But I've never had an account that adds interest internally each month, only annually (I suppose there may be some that do it that way, because they also offer a version that pays the interest externally).

It's all a pain in the !!!!!!  - HMRC insists banks use their broken reporting tool (which is about "credited" interest, not the accessible interest they tell the public is what counts), and we're left wondering whether to ignore HMRC's rules and blame their tool if they come back with "why are you breaking the rules?", or to follow their rules and blame their tool if they come back with "why doesn't your reporting match the banks' reporting?".

dosh37

I wrote to HMRC in August to explain that I had lost track of my savings income. I asked them to provide me with a statement showing the interest automatically reported to them by the building societies & banks so that I could complete my Self Assessment return. This information is supposed to be provided by savings organisations to HMRC before the end of June.

The reply I eventually received stated that they had no information.

Despite what you may read on these forums I don't believe HMRC have the resources or processes in place to cross check Self Assessment tax returns against interest actually paid out.

eskbanker

dosh37 said:

I wrote to HMRC in August to explain that I had lost track of my savings income. I asked them to provide me with a statement showing the interest automatically reported to them by the building societies & banks so that I could complete my Self Assessment return. This information is supposed to be provided by savings organisations to HMRC before the end of June.

The reply I eventually received stated that they had no information.

Despite what you may read on these forums I don't believe HMRC have the resources or processes in place to cross check Self Assessment tax returns against interest actually paid out.

While it's true that BBSI returns are meant to be completed by the end of June, that doesn't necessarily mean that this is what happens in reality, and even once those submissions have been made, there's still a substantial workload for HMRC to process them and allocate them to the correct taxpayer records, so it could be true that they had no data recorded against your account in August, but a request later in the year ought to deliver a different result.

And I don't think anyone has suggested that all SA returns are cross-checked, but some will be!

mebu60

HMRC has to find you first every time an institution submits information, from name, dob and address presumably as the institution won't have UTR and the majority don't have NiNo.

Monanore

I've looked at this a lot.

If it helps I can confirm that HMRC use the BBSI list for PAYE taxpayers, which always contains interest credited in each year of a multi year account, except for NS&I who I believe send a total at the end.  It seems to me sensible to follow this method for self assessment unless HMRC instruct otherwise in the future. 

When asked, they may feel they should quote the conflicting SAIM rules on accessibility but in practice it's pretty clear that changing to taxing interest on a 'when arising' basis from a 'when credited' basis would entail major upheaval and they've enough on their plate.

I think most people save some tax by declaring annually but if you calculate you want to declare a total at the end and not match the BBSI return, that's up to you.