When is monthly interest on a fixed rate bond 1+ years actually counted by HMRC for tax liability?

Yorkshire_Pud

For example a one year fixed rate bond that will pay interest monthly to an external account. There are nine months before the tax hike from 20% to 22% in April 2027. So potentially nine months of interest taxed at the 20% rate before the new rate next year. Then three months interest at 22%?

But do HMRC actually receive and process the information this way on a monthly basis that would be in my favour or do they only count a full year at a time and process the interest as if it were all paid in July 2027? And if two year bond maybe even only count two years interest as having all been received in July 2028?

Thanks for any knowledgeable responses?

wmb194

https://forums.moneysavingexpert.com/discussion/6674973/when-is-monthly-interest-on-a-fixed-rate-bond-1-years-actually-counted-by-hmrc-for-tax-liability

It arises for tax when it's accessible so in this case every month. Over the term of the account, the provider will report the relevant interest to HMRC in its annual returns in the 26/27 and 27/28 years. Yes it will be split.

poseidon1

Monthly paying fixed accounts straightforward enough. Your bank/ building society will issue you with a certificate for interest actually paid during the relevant tax year ( all my 17 savings accounts do so).

The certificated amount is reported to HMRC a few months after the tax year end via the BBSI system.

This is irrespective of the term of the bond, as long as interest paid monthly you are taxable in the actual tax year of a receipt. For this reason virtually all my accounts pay monthly, apart from the occassional 3 or 6 month roll up bond where the interest is taxable in the tax year of maturity.

masonic

It is a good reason to choose fixed term accounts where interest is paid to an external account as these changes approach.

Yorkshire_Pud

I applied for issue 23 of the Market Harborough BS fixed bond around 2.45pm yesterday afternoon. When it came to send my application I got an error screen and then a screen saying my session had timed out due to inactivity (sorry about that your form was laborious for me and also asked me to read all the terms and conditions etc. three boxes to tick after) so I phoned to query and they’d withdrawn the issue 23 and 24 accounts. So I lose out because when I HAD got into the issue 23 application via the mse link it was 100% live and I was in there but penalised for taking too long. I’m going to appeal, in fact already did but they didn’t call back. I do have some deficits that cause me to take longer than the average bear. I will make a complaint if they don’t play nice. Which may or may not get me anywhere.

DRS1

It always amuses me when they expect you to tick that you have read a slew of documents (some of which are very long). I don't think they actually expect people to read their "General Savings Terms and Conditions" in the middle of applying for an account. But of course they have to make you say you have so you can't complain about the small print later.

Yorkshire_Pud

https://forums.moneysavingexpert.com/discussion/comment/82058277#Comment_82058277

It is funny/daft but should work in my favour when I explain how they told me to read all the documents but also timed me out with NO warning message inviting me to keep the session going.

DRS1

Good luck. With those timing out counters I find they are very stealthy and if you aren't on the right page (eg you are reading a document which opened on a new web page) then you can miss it. Then again I have also had cases where I successfully opened an account and that in itself logged me out of my accounts so I had to log in all over again.

I have noticed recently that banks/building societies have pulled a fixed rate product and then a few days later replaced it with one paying a higher rate. Maybe that will happen here?

katejo

https://forums.moneysavingexpert.com/discussion/6674973/when-is-monthly-interest-on-a-fixed-rate-bond-1-years-actually-counted-by-hmrc-for-tax-liability

I want to know this too. I have just started 2 1 year bonds. One of them won't pay interest until the end but the other is doing it monthly and the interest goes to another account.

Yorkshire_Pud

https://forums.moneysavingexpert.com/discussion/comment/82058442#Comment_82058442

While I was on the phone to CS she looked at the bond I was trying to open and said oh there’s a new bond 27 and 28. So not only were they withdrawing the issue while I was online and then on the phone but had immediately replaced the issues with new ones. Also I then checked the mse best fixed rate accounts listing and it had dissapeared whereas I had clicked through from the same listing about twenty minutes before. I don’t know if mse update or the provider presumably it’s mse but I don’t know how they would update in real time, I’d have expected a lag. It’s about 4.4% iirc so no longer qualifies at the top listed providers. Also market Harborough have one issue for interest paid annually and a separate consecutive issue for monthly interest, but the mse listing didn’t differentiate and just said, interest monthly, annually or at maturity and the link went straight to the issue 23 annual interest so you wouldn’t know it was issue 24 for monthly interest. Should be an interesting discussion tomorrow and if they try to fob me off it’s complaint time.

Yorkshire_Pud

Long story short MHBS treated me very well fantastic customer support. Luckily my expired application was found by their tech team after my enquiry and bond was opened yesterday when they had done their checks. Then they talked me through funding £1 so that they could change to the bond with monthly interest. I was all set for a battle and a complaint but they couldn’t do enough to help me and went the extra mile compared to any other financial institution I’ve ever dealt with. I’ve asked them to feedback why they time someone out of their application as if it’s some kind of test and should be more user friendly towards social inclusion.