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Fixed Rate Interest
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DozeyRosey
Posts: 1 Newbie
Morning all,
This is my first post on here so please bear with me.
Up to present date I have taken out fixed rate bonds over the years when the interest rates have been good and received all interest upon maturity. Today a thought popped into my head...If I am declaring three years of interest on my tax self assessment for a matured bond then there is a grater chance of me paying much more tax if over the threshold. Whereas when it is possible to receive interest yearly, then the income is spread across three years which may be more advantageous. Am I right? My 2023/24 earnings were way below the the threshold, whereas previous years have been a lot better. In the near future I have bonds maturing in the same tax year which will increase my income, income which would have been better during my 2023/24 tax year and thereby reducing the 2024/25 tax.
This is my first post on here so please bear with me.
Up to present date I have taken out fixed rate bonds over the years when the interest rates have been good and received all interest upon maturity. Today a thought popped into my head...If I am declaring three years of interest on my tax self assessment for a matured bond then there is a grater chance of me paying much more tax if over the threshold. Whereas when it is possible to receive interest yearly, then the income is spread across three years which may be more advantageous. Am I right? My 2023/24 earnings were way below the the threshold, whereas previous years have been a lot better. In the near future I have bonds maturing in the same tax year which will increase my income, income which would have been better during my 2023/24 tax year and thereby reducing the 2024/25 tax.
0
Comments
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The HMRC rule is that if the interest is not available for you to withdraw until maturity, the tax liability is at that point.
However many fixed rate providers, add interest to your account annually ( although you can not access it) and inform HMRC annually, who then count the interest for that year only . So in effect they break their own rule.
If you self assess your tax you should follow the rules and declare on maturity, although you may find that the interest has already been recorded by HMRC in previous years.
Confused?
The simple way out of this mess, is to have a fixed rate account that will actually pay out the interest to you annually to your bank account, then it is 100% clear when it should be counted for tax purposes.
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