Interest income - when do the interest arise

Hi there, If I have a fixed deposit to be matured in tax year 2023/24 and it would be automatically (principal + interest) renewed for another 12 months which will be then matured in tax year 2024/25. Do I need to report the interest, being automatically renewed as part of the fixed deposit for another 12 months, in tax year 2023/24? Thanks. Oscar

Hi

If you can access the interest at the initial maturity date then it will be declared 23/24. If not, then the total interest will be declared 24/25.

Thank you

Thanks for the reply. Would I be considered as having access to the interest if it is automatically renewed? Oscar

Hi,

The interest will be taxable in the year it arises, if you are able to access the interest, eg withdraw it from the account.  If the account is an ISA, there is no tax liability on the interest.  If the account has restrictions that prevent you accessing the interest, until a set period of time has passed eg, 3 years, the interest would be taxable when you can access it, say after that 3 year restriction had lapsed.

Thank you.

Appreciate the reply. The account is not an ISA. I still struggle to understand the definition of "able to access the interest". Would I be considered to be able to access the interest if the interest, together with the principal, is automatically renewed for another set period on the first expiry date? Can you please comment on the case where the interest is automatically renewed for another set period in an non-ISA account? Thanks. 

Name removed admin .

Hi Oscar,
If you have opened an account for example that does not allow you to touch the capital or interest for a set period of time, say 5 years and as a result you get a much better interest rate.
The interest on this type of account may be calculated every year, but is all taxable in the tax year you are able to access the capital and interest in the account.
By contrast, if you can withdraw from the account at any time, then the annual interest is taxable each year.
Thank you.