Vanquis savings reporting of interest

Frequentlyhere

I'm sure I've seen a thread of this in the dim and distant past but cannot find it for the life of me if there was, so apologies if this is a dupe.

I've noticed that Vanquis savings appears to be treating my 2 year fixed rate saver as if I'm being paid interest (to the same savings account) each month. 

When I look at the interest summary statement for 24/25 it just adds up all this interest, and I assume this is what it is reporting to HMRC. However this interest isn't available for me to take and hasn't been paid externally, and as such my understanding is that I should not have to declare it in self assessment.

Do I have that right? I'm guessing I'll have to explain this away in the SA form if so as they'll otherwise assume I've missed it.

masonic

They are required to report interest credited to HMRC, not interest arising for tax. This is true of all providers. It creates a discrepancy, such that there should be no reasonable expectation that a bank's returns should match what an individual declares.

I've never explained when I've carried unavailable interest forward in a tax return and there hasn't been any comeback.

badmemory

If the interest is not available to you during a fixed term then they should not be declaring that interest to HMRC.  However many banks do.  I know that NS&I don't they declare it at the end of the term as they should.  So whilst it goes on your account, normally annually, they declare the full amount at the end of the term when it is accessable.  However, it could be in your interests to allow them to declare earlier.  For example if you are a 40% tax payer then you are only allowed £500 taxed @ 0% so if the annual interest is £300 fine but when you add 2 years together that is £600 & £100 of it is taxable at 40@.

masonic

badmemory said:

If the interest is not available to you during a fixed term then they should not be declaring that interest to HMRC.  However many banks do.

Any bank that follows the instructions from HMRC will. They are told to "Enter the amount of interest paid or credited to the account for the reported tax year" without further qualification. The issue is that they are crediting interest that is inaccessible. If they credit at maturity, then the inconsistency doesn't arise, and the AER can remain the same (with a higher gross rate to account for lost compounding) so the outcome for the customer is the same.

badmemory said:

I know that NS&I don't they declare it at the end of the term as they should.  So whilst it goes on your account, normally annually, they declare the full amount at the end of the term when it is accessable.

NS&I seem to be the exception and don't follow the requirements of HMRC or the legislation. Though I am not sure if they are in scope. I'm not aware of any (other) non-compliant banks or building societies.

I try to avoid these accounts now I understand the issues they create. If I want interest to be taxable annually, I'll find an account that pays away or permits access. If I want interest delayed to a future tax year, I'll opt for a multi-year fix that credits only at maturity, of which there are a few providers to choose from these days.

badmemory

Obviously HMRC need some training as that is what I was told when querying my interest figures.

Kim_13

This may have contributed to the increased use of Cash ISAs in recent years. Once you’ve had to correct HMRC’s figures once, you probably don’t want to have to do it again if you have the allowance to avoid it. Interest might be marginally higher after tax, but when you factor in the time taken on the phone, waiting for them to send a copy of the figures they’ve been given etc, it’s probably not worth the hassle. When rates were lower, it probably made no difference either way to most people.

Frequentlyhere

Thanks all.  

I think to be fair a few years ago I did exclude such interest in a similar situation and left a note in 'additional notes' on the self assessment form and never heard anything back.  I'd prefer not to have to raise my head above the parapet though to be honest!

Needless to say it would be much better if Vanquis just followed the normal procedure of only declaring interest paid in fixed savers upon maturity (or at least annually).

masonic

Frequentlyhere said:

Needless to say it would be much better if Vanquis just followed the normal procedure of only declaring interest paid in fixed savers upon maturity (or at least annually).

That will either require a change to the legislation or a change by Vanquis to credit all of the interest at maturity.