Checking savings interest reported to HMRC

masonic

Notepad_Phil said:

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.

I copied and pasted the exact same words into the reply above, just bolding one additional word vs your emphasis added to my prior post. The phrase "cannot access...even subject to a penalty" does not mean the same as "can access...subject to a penalty".

In case it is still not clear, when I said "If it is credited to the account and you cannot access it during the term (even subject to a penalty)" I was excluding the scenario where it can be access freely and the scenario where it can be accessed subject to a penalty. I mention the penalty scenario only because some may consider imposing a penalty as equivalent to preventing access, but it is not.

Yorkie1

Just checked the Chetwood T&Cs: 

- interest is added on the anniversary of opening
- for > 12m products, the interest compounds
- "You can’t take money out or close your account until the term has ended. In exceptional circumstances we may consider waiving this, but we’re not obliged to do so. Examples of what we consider exceptional circumstances include bankruptcy, insolvency, and diagnosis of a critical illness"

It will be interesting to see whether the first year's interest is declared to HMRC by them or not (I only opened it in Sept 25, so it'll be tax year 26-27 for the first lot of interest).

masonic

If they follow the rules it will be declared, because the requirements of BBSI returns do not align with taxation. They require all interest credited to be declared, regardless of accessibility.

boingy

I just wish they would show the numbers in our HMRC online accounts rather than us having to chase them for it.

Of course, the vast majority of people won't ever check the numbers, or their payslip, or their tax code. They'll just get on with their lives.