When is NS&I 3yr Bond Interest taxable?
RG2015
Posts: 5,903 Forumite
When is the interest on the 3 Year NS&I Guaranteed Growth Bond added for PSA calculation purposes? If the bond runs to full term the interest on £3,000 will be £202.38
Is this potentially taxable when the bond matures or can it be split over the 3 or 4 tax years covered?
I have tried researching this but cannot find a definitive answer.
Is this potentially taxable when the bond matures or can it be split over the 3 or 4 tax years covered?
I have tried researching this but cannot find a definitive answer.
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Comments
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The product brochure downloadable on the NS&I website states the interest will be added annually on the anniversary date.
So it seems like it will taxable in three different tax year, investment made today would have interest taxable in 2018/19, 2019/20 and 2020/21 (assuming final interest payment was made on 01/12/2020).0 -
Thanks, I did see this but the summary box also states the following:Dazed_and_confused wrote: »The product brochure downloadable on the NS&I website states the interest will be added annually on the anniversary date.
So it seems like it will taxable in three different tax year, investment made today would have interest taxable in 2018/19, 2019/20 and 2020/21 (assuming final interest payment was made on 01/12/2020).
We’ll send you a statement in April each year, showing the interest you’ve earned and any withdrawals you might have made.
Wouldn't this mean that an investment made today would include 4 months of interest in the 2017/2018 tax year? And thereafter 12 months, 12 months and 8 months in the following tax years?0 -
Thanks, I did see this but the summary box also states the following:
We’ll send you a statement in April each year, showing the interest you’ve earned and any withdrawals you might have made.
Wouldn't this mean that an investment made today would include 4 months of interest in the 2017/2018 tax year? And thereafter 12 months, 12 months and 8 months in the following tax years?
No as interest will be added on the anniversary date, the first April statement will show as zero as the anniversary date has not been reached.0 -
We're obviously interpreting this differently.
I would say you haven't earned any interest until the anniversary date so there would be no taxable income in 2017:18.
As it is ambiguous you probably need to phone NS&I for clarification before investing.0 -
Thanks again. I do find the PSA rules can be confusing.Dazed_and_confused wrote: »We're obviously interpreting this differently.
I would say you haven't earned any interest until the anniversary date so there would be no taxable income in 2017:18.
As it is ambiguous you probably need to phone NS&I for clarification before investing.
NS&I will be reporting the interest to HMRC so potentially, both of these parties could be interpreting the rules differently.
My main concern is that the whole three years interest does not all hit at the end of the three years.0 -
You get a personal savings allowance of £1000 or £500 or £0 depending on your tax bracket. You can use the allowance against your taxable interest income for that year. It's pretty straightforward unless you are right on the cusp of a bracket or have complex tax affairs.Thanks again. I do find the PSA rules can be confusing.
No they couldn't. NS&I will report under UK tax rules. HMRC administer UK tax rules. They are the same rules.NS&I will be reporting the interest to HMRC so potentially, both of these parties could be interpreting the rules differently.
For the tax year in which the interest income is made available to you, NS&I will say it's been made available to you. HMRC are not going to "interpret it differently" as all they have to go on, in terms of what interest you got, is what NS&I tell them.
If you make a deposit today and the product T&C says, as Dazed tells us, that " the interest will be added annually on the anniversary date" -then no interest is added until you get to the anniversary date, a year from now, which is in the 2018/19 tax year. NS&I have nothing to report to HMRC (or you) this tax year because no interest has been added to your account this tax year.
Your concern is misplaced, because as Dazed tells us (which I haven't checked but they have no reason to lie...) the product brochure says "interest will be added annually on the anniversary date". If it is added annually on the anniversary date, it is not added in one lump at the end of the three years.My main concern is that the whole three years interest does not all hit at the end of the three years.
So, don't be concerned. Just read the product T&C, and then read UK tax law if you aren't satisfied with answers here.0 -
It's all too simple.
1 Interest is tax free up to £6k/£1k/£500/£0 if you are 0%/20%/40%45% tax payer
2 You pay tax on interest received in the tax year
Job done0 -
Thanks, I did see this but the summary box also states the following:
We’ll send you a statement in April each year, showing the interest you’ve earned and any withdrawals you might have made.
Wouldn't this mean that an investment made today would include 4 months of interest in the 2017/2018 tax year? And thereafter 12 months, 12 months and 8 months in the following tax years?
Thanks newatc, I had missed your post when I replied to dazed and confused.No as interest will be added on the anniversary date, the first April statement will show as zero as the anniversary date has not been reached.
I have a background in accounting and am used to applying income and expenditure in the period to which it relates. Hence I will have earned 4 months of interest during 2017/2018.
However, your explanation does make this much clearer.0 -
bowlhead99 wrote: »Your concern is misplaced, because as Dazed tells us (which I haven't checked but they have no reason to lie...) the product brochure says "interest will be added annually on the anniversary date". If it is added annually on the anniversary date, it is not added in one lump at the end of the three years.
Thank you for your comprehensive replies. However, I still maintain that there is some ambiguity.capital0ne wrote: »It's all to simple.
You pay tax on interest received in the tax year
The interest is added annually on the anniversary date but I only receive the interest at the end of three years.
Therefore the date I actually receive the interest (after 3 years) is not the date that it becomes liable for tax.0 -
Thank you for your comprehensive replies. However, I still maintain that there is some ambiguity.
The interest is added annually on the anniversary date but I only receive the interest at the end of three years.
Therefore the date I actually receive the interest (after 3 years) is not the date that it becomes liable for tax.
No, you receive the interest when it is added to your account - that is on each anniversary date, not at the end of three years.0
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