Help on "Interest is counted in the tax year you can access it"!

hkareno

Hi I hope someone can help me out on personal tax matter. 

I got a 60 day notice account and interest paid monthly. My understand is interest is counted in the tax year you can access it. My question is do interests paid on 1st Mar and 1st Apr 2025 count into 2024-25 financial year as the account requires 60 days notice to withdraw ie after 60 days notice it is 2025-26 year. 

Thanks a lot       

refluxer

I see where you're coming from (due to the similarity with similar scenarios with fixed rate savings accounts where credited interest can't actually be accessed) but I would imagine that interest credited to a notice account will be counted for tax purposes on the date it was credited, regardless of the notice period.

The bank or building society will be reporting the two interest payments you mentioned to HMRC for the 2024-25 tax year, for sure.

MyRealNameToo

hkareno said:

Hi I hope someone can help me out on personal tax matter. 

I got a 60 day notice account and interest paid monthly. My understand is interest is counted in the tax year you can access it. My question is do interests paid on 1st Mar and 1st Apr 2025 count into 2024-25 financial year as the account requires 60 days notice to withdraw ie after 60 days notice it is 2025-26 year. 

Thanks a lot       

Never seen a 60 day notice account where you cannot access it sooner via paying penalties. 

It will count for HMRC, the guidance is in relation to annual interest accounts where in theory there is an accrual for the interest to be paid on the anniversary of the account but you dont get taxed on the accrual and instead will be taxed on the full amount once paid over next financial year. 

Kim_13

refluxer said:

I see where you're coming from (due to the similarity with similar scenarios with fixed rate savings accounts where credited interest can't actually be accessed) but I would imagine that interest credited to a notice account will be counted for tax purposes on the date it was credited, regardless of the notice period.

The bank or building society will be reporting the two interest payments you mentioned to HMRC for the 2024-25 tax year, for sure.

This. Anyone wanting the interest out on the day it is credited could surely work out how much it will be, then count back 60 days from 1 March and 1 April and put in the notices at the right time. Then it is accessible on the day it is credited. 

I believe HMRC have taken the line with multi year fixes that if interest could have been paid away, then it is accessible - as it is a choice by the taxpayer rather than the provider that has caused it not to be. That would be the same principle as expecting the taxpayer to put in the notice if they were relying on accessing interest to pay the tax.

masonic

Kim_13 said:

I believe HMRC have taken the line with multi year fixes that if interest could have been paid away, then it is accessible - as it is a choice by the taxpayer rather than the provider that has caused it not to be. That would be the same principle as expecting the taxpayer to put in the notice if they were relying on accessing interest to pay the tax.

No, they haven't. If you choose a product version at application whose terms require compounding, even if you have the choice of a version that pays away, you are bound by the terms of the product actually offered after you apply.

If the contract you agree has provisions for access, with or without a penalty, whether or not you do, then it is accessible.

Unless you complete a tax return, you should be prepared to provide evidence you could not access the interest according to the product terms.