Fixed Rate Bonds - confused by HMRC advice

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81965745#Comment_81965745

I'd just like to stress - this is a general question about bonds, not just this one. Also, I'm not trying to get out of paying tax annually on this or any other account in favour of being taxed all at maturity - I have no intention to try and appeal things either way. I really would just like to have confidence as to the current situation and for future reference. (Sorry this isn't all in direct reference to your reply, just a general point).

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81965766#Comment_81965766

Masonic gave an answer to that back on page 6.

Enzo_L

https://forums.moneysavingexpert.com/discussion/comment/81965927#Comment_81965927

So did I on page 5, but I got the response "That may be your interpetation, but …….".

You can lead a horse to water ……. 🙄

Bigwheels1111

A bit off the subject here but some advice would be good.

I self assess as I earn over 10K interest a year.

This year I started work again after a 12 year absence as I was my wifes carer, carers allowance and interest was under £18,570, so not tax to pay.

So now I will need to pay tax on the interest.

Fair enough.

Does anyone know if I will just pay say £2000 for last year 25/26, or will I have to pay £3000 50% for next years 26/27 tax. Then make another payment in June or july. Like self employment.

Thanks.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81966364#Comment_81966364

I believe you will have to do a payment on account if your tax bill for 25/6 is over £1k. Payments on account aren't just for self employed income they are a feature of self assessment.

Bigwheels1111

https://forums.moneysavingexpert.com/discussion/comment/81966399#Comment_81966399

Thanks

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81966364#Comment_81966364

It will depend on whether you have paid any tax at source or not.

POA only come into play in some instances, even when the liability for the tax year a return has been filed for is £1,000 or more.

But if you haven't paid any tax at source i.e. under PAYE then it's safe to say POA will apply.

LITRG cover it here.

https://www.litrg.org.uk/news/tax-bill-higher-you-expected-dont-forget-payments-account

Bigwheels1111

https://forums.moneysavingexpert.com/discussion/comment/81966409#Comment_81966409

Thank you that article is very informative, If I understand it correctly PAYE tax was 3k, I owe 2.6k tax on interest.

Which is over the 80% limit, so only need to make one payment and not 50% towards next year.

Fingers crossed.

Just called HMRC, no wait at all.

One off payment only, great news.

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81966047#Comment_81966047

• The answer on page 6 is certainly helpful when looking at products in future
• Your answer is an opinion which may be correct (or not) - I'm still confused given they seem to be saying the system should work one way, but HMRC appear not to agree. So them providing a letter may be perceived as helpful, but as I keep on saying I don't want or intend to argue HMRC's decision after the fact, so a letter is of no use to me. I just want to know how this annual interest will be handled which nobody seems to be able to predict with any certainty.
• Also, while I've mentioned the supplier who replied to me with the draft letter, I've contacted a number of others re current bonds, and they either haven't replied or just can't give me an answer as to how the annual interest should be taxed. So having a better idea of what to look out for in future still doesn't avoid it seeming to be a lottery as to how these current ones will be taxed, possibly depending on the exact terms, possibly not.

One reply I have had says that the funds aren't accessible until maturity. Then they go on to say withdrawls can happen 'in exceptional circumstances but you will have to withdraw all of your money and close your account.' So which is it? How will HMRC perceive that? So I apologise if you're not altogether impressed with my reply to your answer - I'm just finding this whole thing utterly baffling and frustrating that I can't plan ahead re tax for the next 5 years of interest for products I've already taken out. as it doesn't seem that I can know how HMRC will view these products until the end of the tax year. Or in my case a year after the end of the tax year, as i've only just found out that they didn't apply the tax on interest for the 24-25 year in accordance with how the 'rules' are explained on this website. EDIT: or indeed HMRC's wording of the 'rule' as quoted in the following post here by wmb194 (thanks).

wmb194

https://forums.moneysavingexpert.com/discussion/comment/81966591#Comment_81966591

It arises for tax when it's accessible but the default is for HMRC to tax you on it in the year it's credited. Edit: I’d say that, ‘only accessible in exceptional circumstances’ means that it isn’t accessible.

Banks won't give you tax advice.

You should try to get on to Self Assessment, it makes it so much easier to deal with this particular scenario.

I see it as dealer's choice though: HMRC clearly doesn't care about this issue.

"If an individual is unable to withdraw or have access to the interest when it is credited to their account, or has a specific product such as a bond, the interest will not arise and therefore they will not be taxable until they have access to the interest. HMRC staff should seek advice from BAI (Financial Products Team) where there is doubt about whether or not someone is entitled to interest."

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2400