Warning British Growth Bonds

Fluffysheep7

So interest is taxable payable in year of maturity. So with the 5 year Bond compounded interest is 21%. It will take me into higher rate tax! Have I misunderstood this?

surreysaver

Depends how close you are to the higher tax threshold 

eskbanker

Fluffysheep7 said:

So interest is taxable payable in year of maturity. So with the 5 year Bond compounded interest is 21%. It will take me into higher rate tax! Have I misunderstood this?

Not sure there's any need for a warning when it's clearly explained on the main product page?

Is the interest taxable?

Yes, in the tax year your Bond matures

[...]

Will I have to pay tax on my savings?

The interest you earn on Guaranteed Growth Bonds will count towards your taxable income in the tax year your Bond matures. But this doesn’t mean you’ll have to pay tax on it. It all depends how much interest you earn in total and what rate of tax you pay. You can find out more in our Help section.

https://www.nsandi.com/products/guaranteed-growth-bonds

Fluffysheep7

Well as I nearly bought some but didn't spot that trick initially I thought it worth flagging. Maybe not so quick as some to spot compounding effect and real rate of interest paid out. In most products interest is recognised yearly even if the money isn't paid out until the end.

eskbanker

Fluffysheep7 said:

Well as I nearly bought some but didn't spot that trick initially I thought it worth flagging. Maybe not so quick as some to spot compounding effect and real rate of interest paid out. In most products interest is recognised yearly even if the money isn't paid out until the end.

Still not seeing any 'trick' here - some multi-year accounts add interest on maturity, others do so annually?  You might have had a point if there was a deliberate attempt to conceal this information or stash it away in multi-page Ts & Cs but the wording I quoted before is prominently shown on the main product page!

Fluffysheep7

As I said we are not all as clever as you.

sausage_time

5 years is a long time.  You may be a higher tax payer by then in any case.  Or you may be paying no tax at all.

masonic

Fluffysheep7 said:

Well as I nearly bought some but didn't spot that trick initially I thought it worth flagging. Maybe not so quick as some to spot compounding effect and real rate of interest paid out.

The 'trick' is to use these accounts if you are going to have a low income in the year of maturity, as then you are able to pay less tax.

Fluffysheep7 said:

In most products interest is recognised yearly even if the money isn't paid out until the end.

This is incorrect. Interest is always taxable when it becomes available to access, regardless of when it is credited to the account. NS&I is simply stating the correct tax position that applies to all fixed term accounts of this type.

Fluffysheep7

OK thanks. Learn something new.