Birmingham Bank?

Albermarle

Ocelot said:

Albermarle said:

Ch1ll1Phlakes said:

michaels said:

Bigwheels1111 said:

Two things,

One, Interest must be compounded, you will get taxed on all the interest in year 5. Ouch.

Two, At 4.40% Atom are great, fast opening, funding and payouts. Plus interest can be paid away each year,

so you pay tax each year, minus you tax free PSA of £1000 for 20% tax payers..

There seem to be differing opinions on whether the interest is taxed annually or at the end of the term - do they produce annual interest statements for the account?

It's to do with when you get access to the funds. It doesn't matter how often your interest is paid (monthly, annually or at maturity) but you you get taxed in the tax-year you get access to that interest.

Simple example: You get £600 interest per year. If this is paid out of the account, i.e. you get access to it every year so it's under the £1000 basic PSA limit. However, if it was paid into the savings account and your didn't have access to it during a 2 year (or more) fix, then you're interest would be £1200+bit and now over the PSA

See this link to MSE about this and a fully example that what I have here Best savings accounts: 5% easy access or 4.62% fixed rate

For a long term fix, look for paid away annually. That way even on large sums the interest from your fix won't be higher than the PSA. 

The Birmingham account is paid annually (into the account) and at maturity - so you would all years of interest at the end of the term and may have tax to pay on it. From reading their T&Cs statements are possibly bi-annually (every six months) but every bank now should be giving you statements at least once per year.

There a few threads on this subject and it is not as straightforward as that.
The MSE link is correct in the way it interprets the HMRC rules. However in many cases HMRC do not follow their own rules, or to put it more accurately can not follow their own rules as they do not have enough detailed info from the providers.
Many ( most ) savings providers offering fixed term savings accounts over one year, still report the annual interest earned to HMRC, even when the client has no access to it. At that point HMRC have no idea of the terms of the savings account, so just use the annual interest reported as the basis for any tax calculation.

Once you write to them telling them when  you receive the interest, and that it is not available for a couple of years they ignore your letter anyway, and don't even acknowledge it, making you pay tax on interest you have not yet received.

Although depending on your personal tax situation, it might suit some people for it to be included annually, rather than all at the end.
People who fill in self assessments also have a kind of dilemma. They should fill in the SA correctly, only including interest that is available, even though likely that HMRC will tax it when reported.

mebu60

I decided a few years back to just declare the interest in the tax year it is paid whether available or not when I realised that most providers report it as paid to HMRC in their annual returns. Compared to the impact of the frozen personal allowance thresholds it's not my biggest issue with the tax system. If I had a lot of multi-year bonds I might be making different noises. 

The only exception would be for NS&I bonds > 1 year as they do report it correctly at maturity.