Which tax year to declare interest for multi-year fixed deposit

I read the HMRC interest manual, and understand if the interest posted in particular tax year, it shall be reported in the corresponding tax year tax return. I also read that if the interest is not avaialble for use until maturity, the total componded interst shall be reported all together at maturity. I'm confused about what does it mean by "not available". When I created the time deposit, I have the option to pay it out annnuallyto my other bank account (therefore it's obviously available), or to credit it to the time deposit account fitself for compounding (and in this case the interest is only available for withdrawal at maturity) Given the 2 option, I chose the intereste credited to fixed deposit for componding. Since I have made the choice at the beginning, it cannot be changed or reversed afterwards. In this case, the interest has been credited monthly to my fixed deposit account (although I cannot withdraw it). Shall I report the interest credited in each tax year, or consider it as "unavailable" and report it in lump sum at maturity?

Hi,

Bank interest that is paid to you each year into your account, which you can access, is taxable in the year that it arises.  

Where the interest is held in the account, until the account matures, only then will the total sum of interest arising over the whole term, be taxable in the tax year it is paid.

Thank you.

Morning, resurrecting this thread with a question. I have three banks & building societies, all with fixed-term products and I asked what interest would be declared to HMRC so that when I do my SA I can make sure I am declaring the correct amount. I have had three different answers (and I'm not referring to the amount) Can I view the amounts in my SA or online tax account which each one has submitted? If one/all have submitted an interest amount I have no access to for another 4 years do I need to correct it in my SA and if so, what is the process? Thanks.

Hi Roy_F,

If you can access the interest paid then you will declare it on an annual basis.
If the type of account prevents you from accessing the funds until maturity, then all interest is declared in the year of maturity. please refer to:
SAIM2400 - Interest: taxation of interest: the tax charge ‘Interest arising’

Thank you.

Hi, HMRC Admin 20, From the link "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." The accounts I'm asking about are bonds and the interest is reinvested and I have no access to the money in the accounts until they mature. However more than one of the account providers says they declare the interest anyway and say they do not have the option to declare if I do or do not have access to it. Hence why I'm asking if I can see which bank has declared what amount. If bank A declares £100 interest that I will not be able to access for another 4 years do I contact yourselves to correct that amount? I don't want to submit a SA saying I've received £400 interest if the total amount the banks have declared is £4000. Likewise in 4 years' time, I don't want to submit a SA saying I've received £4000 when the banks have declared £400 Either way, it looks dodgy. Thanks.

Apologies about the formatting on my last post, it really didn't look like that when I hit Post this reply

Hi Roy_F

You will need to telephone or write in and ask for the information and explain why. A note can then be put on your record as to why the interest details don't match.

Thank you.

Hi HMRC Admin 5, Thanks, it sounds a lot easier than I was expecting. Have a good weekend. Cheers Roy

With regards to interest on a bond that you cannot access until the end of the bond, say a 10 year bond. Can top slicing apply to the interest on maturity or is the whole about taxed in the year of maturing at that years rate?

Hi,

Top slicing relief applies to chargeable event gains to reflect the gains that may have accrued over a large number of years. It does not apply to savings interest from bank,  buiding society accounts or savings bonds.

Thank you.