Checking savings interest reported to HMRC

Notepad_Phil

Yorkie1 said:

Just to confirm my understanding:
If I write down, for each non-ISA account, the savings interest credited from 6 Apr - 5 Apr in the statements, those will be the figures which HMRC relies upon when determining savings interest?

(Assuming that the interest was credited gross, and ignoring any complications of multi year bonds etc)?

Yes it's interest credited from 6 Apr to 5 Apr, so adding them up (or 50% if joint) will provide the total that should be used by the HMRC and should match the figures sent by the financial institutions, but financial institutions are not infallible so the value the HMRC is using may not match the correct one - this also assumes you're not getting interest fron non bank/building society accounts elsewhere e.g. interest from gilts in a general investment account, and you are correct that multi-year bonds have many complications!

Yorkie1

Many thanks to you both. 

No joint accounts, nor interest from things outside cash savings accounts, cash ISAs and S&S ISAs. 

My NWide 18 month bonds credit interest on the anniversary and at the end, both of which are in the same FY (June and Dec).

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

masonic

Yorkie1 said:

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If it is credited to the account and you cannot access it during the term (even subject to a penalty), then the interest will all be taxable at maturity. This is a scenario where HMRC tends to get it wrong using information from the provider. If it is paid out to an external account, then it is taxable when paid.

Notepad_Phil

Yorkie1 said:

...
My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If you kept the interest in the account then as you can only gain access under extreme circumstances and only if they agree, then under hmrc rules the two lots of interest should be added and counted against the maturity tax-year and is what you would do if you were self assessing. However Chetwood has probably sent the interest details of the anniversary year at end of year 1 and then a year later the details of the second lot of interest, so the hmrc figures will probably not match up - which probably helps most people who do not self assess and are oblivious of such mechanisms and amounts of interest they receive.

Notepad_Phil

masonic said:

Yorkie1 said:

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If it is credited to the account and you cannot access it during the term (even subject to a penalty), then the interest will all be taxable at maturity. This is a scenario where HMRC tends to get it wrong using information from the provider. If it is paid out to an external account, then it is taxable when paid.

I think that bit may be wrong as per example in https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Sam entered into a five year fixed-term bond on 6 April 2017.  The bond credits interest to Sam’s account annually on the 31 December.  Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

phlebas192

Pat38493 said:

Further, if HMRC has pages on their website that say they are collecting this information automatically from banks, would they win in court if they fined somebody for not triple checking all this information and it was challenged?

Yes, it would be a trivial win for them. Interest reported by banks etc to HMRC can only ever be a minimum of the total amount (eg if you had leant money for interest to a family member. Also consider that some institutions may make mistakes and under-report) and it is always the responsibility of the individual to report all taxable income to HMRC.

Banks etc reporting to HMRC is for HMRC's benefit, not the individuals'!

SnowMan

Notepad_Phil said:

masonic said:

Yorkie1 said:

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If it is credited to the account and you cannot access it during the term (even subject to a penalty), then the interest will all be taxable at maturity. This is a scenario where HMRC tends to get it wrong using information from the provider. If it is paid out to an external account, then it is taxable when paid.

I think that bit may be wrong as per example in https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Sam entered into a five year fixed-term bond on 6 April 2017.  The bond credits interest to Sam’s account annually on the 31 December.  Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

Is that tax manual reference not confirming what masonic is saying? Masonic is saying the interest can be accessed during the term (because it can be accessed with a penalty) and so you can't say 'Sam cannot access it during the term (even subject to a penalty)' so the interest will be taxable when credited?  

clairec666

phlebas192 said:

Pat38493 said:

Further, if HMRC has pages on their website that say they are collecting this information automatically from banks, would they win in court if they fined somebody for not triple checking all this information and it was challenged?

Yes, it would be a trivial win for them. Interest reported by banks etc to HMRC can only ever be a minimum of the total amount (eg if you had leant money for interest to a family member. Also consider that some institutions may make mistakes and under-report) and it is always the responsibility of the individual to report all taxable income to HMRC.

Banks etc reporting to HMRC is for HMRC's benefit, not the individuals'!

It's possible that interest is over-reported too. E.g. fixed rate bonds mistakenly reporting interest each year instead of at the end of the term. And Zopa mistakenly reporting ISA interest.

masonic

Notepad_Phil said:

masonic said:

Yorkie1 said:

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If it is credited to the account and you cannot access it during the term (even subject to a penalty), then the interest will all be taxable at maturity. This is a scenario where HMRC tends to get it wrong using information from the provider. If it is paid out to an external account, then it is taxable when paid.

I think that bit may be wrong as per example in https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Sam entered into a five year fixed-term bond on 6 April 2017.  The bond credits interest to Sam’s account annually on the 31 December.  Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

I am saying the only case where interest doesn't arise until maturity is where you cannot access it during the term (even subject to a penalty). Sam's example backs up what I am saying. The imposition of a penalty is not sufficient to consider it inaccessible.

There are real world examples of this, such as the fixes offered by Natwest and Lloyds group, which are typically not the best rate because they do not require you to lock up your money for the full term, but they are often marketed alongside products which require money to be locked away for the term. These accounts are probably better categorised as limited access (albeit with no 'free' withdrawals) than fixed term.

Notepad_Phil

masonic said:

Notepad_Phil said:

masonic said:

Yorkie1 said:

My Chetwood 2 year bond credits interest on the anniversary and end, which will be two separate FYs. Will need to check the T&Cs for that one. 

If it is credited to the account and you cannot access it during the term (even subject to a penalty), then the interest will all be taxable at maturity. This is a scenario where HMRC tends to get it wrong using information from the provider. If it is paid out to an external account, then it is taxable when paid.

I think that bit may be wrong as per example in https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2440

Sam entered into a five year fixed-term bond on 6 April 2017.  The bond credits interest to Sam’s account annually on the 31 December.  Sam can only gain access to both the annual interest and the principal in advance of 5 April 2022 if a penalty is paid for early access.

Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited.

I am saying the only case where interest doesn't arise until maturity is where you cannot access it during the term (even subject to a penalty). Sam's example backs up what I am saying. The imposition of a penalty is not sufficient to consider it inaccessible.

Yes agree with that, but I don't get that meaning from your original post which to me reads as regardless of whether you could access money with a penalty then it would be taxable at maturity. But happy to put that as my misreading.