Bank Saving Interest

I have a bank account in Hong Kong and I have put the money in time-deposit. Normally, the interest is credited yearly. However, I have opted for auto-renewal for one year earlier this month. May I know whether the interest will be taxed in 2023-2024, or in 2024-2025 when I will get back my principal and interest? The details are listed below, thanks. - Time-deposit set up on 2 Nov 2022 - Opt for auto-renewal on 10 Jul 2023 - No money will be credited to my account on 1 Nov 2023 - Principal plus interest will be credited to my account on 1 Nov 2024. - I will apply for split year treatment (I will come to UK and work on 1 Sep 2023). Hence, with working in UK for >183 days, I will be tax resident in year 2023-2024. Thanks a lot.

Hi,

Tax liability in the UK is calculated using the arising basis. This means that you are taxable on the interest in the tax year it arises.

If you are unable to access your principle funds until maturity of the account, then the interest would be taxable on maturity. If you can access the principle funds at any time, then the interest would be taxable annually.

Thank you.

Just a follow up question. What mean by "access" exactly? In the above case, I could only get the principal plus interest in a lump sum on 1 Nov 2024. I understand that it should mean that I cannot access the principal and interest, right? Further, would it be the same case if the auto-renewal could possibly be cancelled before 30 Oct 2023, but I keep it untouched without cancellation? Thanks.

Hi,

It means you can withdraw/move it. Some fixed rate accounts dont let you take anything out and its these type of accounts that although you get annual interest it is only withdrawable on

maturity so in your case your interest would be declared 24/25 tax year for both scenarios.

Thank you.
 

Thanks for your reply and I understand that in both the above scenarios, the interest will be taxed on 24/25 tax year. Last two questions, please: I understand that I have an allowance on interest gained if I am a basic rate tax player. If the interest gained in the tax year is less than that of the allowance, do I still need to report to HMRC? If yes, which form I need to fill in? Thanks.

Hi,

If you meet the criteria for completing a Self Assessment tax return you will report it there.

Check if you need to send a Self Assessment tax return

Thank you.