Accounts that pay interest at maturity

Apollo22

My go to is NSI. I did check MSE and all the accounts they list as paying at maturity actually don't e.g. RCI. Does anyone know of any other banks that pay at maturity as an option. I am looking at a 2-3 year bond.

thanks

ColdIron

Have a look at Moneyfacts Here

Use the 'Full Search' option to play about with it and make sure the Sort option is Rate

Albermarle

Most fixed rate bonds only make the interest available at maturity ( or at least have the option to do that).
However they report the interest to HMRC annually, and add the interest to the account annually. If that is what is causing you an issue. NS&I do not do this .

Apollo22

Its my understanding that I dont get taxed on the interest till I can access it, is that correct. I assumed at maturity meant I declare all in interest in the year received

fuzzzzy

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Notepad_Phil

fuzzzzy said:

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Though most financial institutions will still report interest annually regardless of whether the HMRC officially considers the interest as accessible or not. This on a supposedly tax-on-maturity account is likely to leave a non self-assessment tax-payer having to convince the HMRC that the interest reported is actually to be taxed at maturity and seemingly will involve phone-calls to the HMRC and provision of their account t&c's, otherwise the HMRC will consider the amount of reported annual interest as being taxable in that tax-year instead of the total interest as being taxable in the final tax-year.

Apollo22

Notepad_Phil said:

fuzzzzy said:

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Though most financial institutions will still report interest annually regardless of whether the HMRC officially considers the interest as accessible or not. This on a supposedly tax-on-maturity account is likely to leave a non self-assessment tax-payer having to convince the HMRC that the interest reported is actually to be taxed at maturity and seemingly will involve phone-calls to the HMRC and provision of their account t&c's, otherwise the HMRC will consider the amount of reported annual interest as being taxable in that tax-year instead of the total interest as being taxable in the final tax-year.

does this cover it:
No withdrawals are allowed until the fixed term ends, unless there are exceptional circumstances. If you need to withdraw early, then you will lose the interest earned

Albermarle

Apollo22 said:

Notepad_Phil said:

fuzzzzy said:

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Though most financial institutions will still report interest annually regardless of whether the HMRC officially considers the interest as accessible or not. This on a supposedly tax-on-maturity account is likely to leave a non self-assessment tax-payer having to convince the HMRC that the interest reported is actually to be taxed at maturity and seemingly will involve phone-calls to the HMRC and provision of their account t&c's, otherwise the HMRC will consider the amount of reported annual interest as being taxable in that tax-year instead of the total interest as being taxable in the final tax-year.

does this cover it:
No withdrawals are allowed until the fixed term ends, unless there are exceptional circumstances. If you need to withdraw early, then you will lose the interest earned

There are numerous threads on the forum about this, and HMRC seem to be at odds with their own rules.

Even with the above statement, the provider will almost for sure report the interest to HMRC annually, and as HMRC will have no other info about the T's and C's of the account, they will just tax it annually.

As mentioned above you can try and unwind this by just submitting your own figures to HMRC, but might not be a simple process.

Notepad_Phil

Apollo22 said:

Notepad_Phil said:

fuzzzzy said:

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Though most financial institutions will still report interest annually regardless of whether the HMRC officially considers the interest as accessible or not. This on a supposedly tax-on-maturity account is likely to leave a non self-assessment tax-payer having to convince the HMRC that the interest reported is actually to be taxed at maturity and seemingly will involve phone-calls to the HMRC and provision of their account t&c's, otherwise the HMRC will consider the amount of reported annual interest as being taxable in that tax-year instead of the total interest as being taxable in the final tax-year.

does this cover it:
No withdrawals are allowed until the fixed term ends, unless there are exceptional circumstances. If you need to withdraw early, then you will lose the interest earned

That depends on what you mean by 'it'.

Yes if the interest is paid into the account then the HMRC would 'officially' consider that the total interest of such an account should be taxed in the final year, but every year the financial institutions have to report the amount of interest that has been paid into the accounts of their customers and there is nothing in that report to differentiate between an account where the interest should be taxed annually and where the multiple years of interest should be added together and then be taxed at maturity.

Therefore the HMRC by default will see the reports coming in and assume that the interest should be taxed annually as they have no means of knowing what type of account it is.

Sounds a bit ridiculous doesn't it, but that's the way it operates, and to be honest it's probably best for most tax-payers that it does operate that way, as I bet most people taking out multi-year non-accessible accounts are blissfully unaware that if they pay the interest into the account then the total interest should be taxed in the final year and hence might easily break their £1000 Personal Savings Allowance. So the fact that by default they actually get taxed yearly is probably better for them.

fuzzzzy

Notepad_Phil said:

fuzzzzy said:

Just make sure that the terms and conditions of the account do not allow any early access to the capital and interest by paying a penalty, and that you can't change the options during the term to have interest paid out before maturity. If either of these options are possible then HMRC will say the interest is accessible annually.

Though most financial institutions will still report interest annually regardless of whether the HMRC officially considers the interest as accessible or not. This on a supposedly tax-on-maturity account is likely to leave a non self-assessment tax-payer having to convince the HMRC that the interest reported is actually to be taxed at maturity and seemingly will involve phone-calls to the HMRC and provision of their account t&c's, otherwise the HMRC will consider the amount of reported annual interest as being taxable in that tax-year instead of the total interest as being taxable in the final tax-year.

Well yes. I guess if the OP is not a self assesser and wants their interest paid at maturity for tax reasons, they will have to endure the hassle with HMRC.

Apollo22

I am a self assessor and having the tax at maturity makes more sense for me, as it impacts the tax I am liable to as I expect to be retired by then