rl11

I have exactly the same issue in that my tax code has been reduced because of untaxed interest - £162. I only have a state pension plus a very small private pension. My total income is less than £12,570. Clearly I am not going to pay any tax on my interest. The upshot of my new tax code, is that my private pension has 60p tax deducted every month!! Why is the tax code adjusted because of interest anyway? Surely the estimated income should decide if this is necessary? I believe the starting rate is £5,000 plus the £1,000 personal allowance, so anyone with an Income estimate of less than £12570 can receive £6,000 without paying tax on interest. Anyone with a standard tax rate has a £1,000 allowance and anyone on the high rate can have £500. Adjusting the tax code for everyone, is surely assuming that everyone is on the highest rate? What do I need to do to get my tax code adjusted so that I no longer get this silly deduction and how do I get my 60p's back!

After all this time, the original post: "Do I have to get the interest paid out in order to be able to declare the interest each year? Or can the fact that I have the option to have it paid out, mean I can still declare each year, even though I won't have access until 2027?" which is the same question as the sostupid post: "On opening the account I have the option to have the interest paid into a different account or to have it reinvested. Does having that option mean the interest is taxed annually even if I opt to have it reinvested and cannot access it until it matures?" Has been answered as: "Any account that you can access the interest annually, needs to be declared annually so for your senario as the account gives you the option to have it paid elsewhere, this will be declared annually." Therefore, is this finally confirmation that simply having the option to have interest paid elsewhere (even if not taken), means interest is declared annually and negates whether the interest can be accessed before maturity or not?

@steveinkelso - absolutely, without reading threads like this, the obvious thing to do is declare what your bank tells you has happened, and that's precisely what the majority of people would do. There is no "law" that says maturity or access are even relevant. What I would like to know is what the repercussions might be, if you declare interest received annually (in good faith) and it later comes to light that it ought to have been declared at maturity because of some technicality over when the interest was accessible or whether it could have be accessed at any point during the term.

Without reading a discussion thread of this type, obviously everyone would report their interest according to what their annual certificate of interest says. What I would like qualified, is that if an individual was to report their interest, based on the annual certificates received from their provider, would they face a penalty, if it was later discovered that it ought to have been reported at maturity?

I still feel that HMRC are missing the point. The guidance that we keep being referred to, does not make sense! – and the legislation stipulates nothing. How can a financial adviser help? It makes perfect sense to everyone (and surely HMRC?) that you should report interest, according to what the provider shows on your annual Statement of Interest. It shouldn’t matter what the term is or whether you get interest Monthly, Quarterly, Annually or on Maturity – or when you can access it. If the provider is providing the wrong figures (on the Statement and to HMRC) then surely HMRC should intervene with them? Therefore the guidance should be altered to state that we simply report what our annual Statement of Interest shows – or at least, that if we do that, we will not be penalised for doing anything wrong.

@Taxpayer123 I think you have summarised the guidance correctly. However this is a nonsense and HMRC need to review the guidance! Clearly if you have interest paid monthly, quarterly or annually it "arises" when credited to your account - regardless of access to the interest. The total credited to your account each tax year is what the providers put on your annual interest statement and is also the amount of interest they report to HMRC. This is irrefutably the amount of interest you have received for each given tax year. It is utterly ridiculous to suggest that none of the interest arises until account maturity, unless no interest is credited until account maturity. I can understand that somebody unable to settle their tax bill until they gain access to their interest (at maturity) might argue that it does not arise until maturity but that is clearly an unusual exception. Under normal circumstances, interest obviously "arises" when it is credited to your account - any account - external or the same - accessible or not

Can someone from HMRC please read and understand the issue and then give a reply which isn't simply referring to guidance that does not provide an answer?

This subject just keeps going round in circles! My take is that we (the savers) should simply submit a tax return based on what our savings providers have told us they have submitted to HMRC - via the annual interest statement they provide. If the savings providers are submitting their figures (to us and HMRC) incorrectly, then HMRC should intervene and advise them they are reporting the figures incorrectly. Until (or unless) they do, it should be accepted by HMRC that savers are, in good faith, submitting what is correct and tax on interest should be applied based on what the savings providers state as annual interest.

Can you please point me to the "legislation" that explains the notion of taxing interest only at the end of the term? I have only been able to find guidance - which also states the following in regards to interest: “it was held to include the ‘swelling of a person’s assets’ even where the person had no immediate right to the income” "A person may be taxable on interest even if they cannot withdraw and spend the money" It makes perfect sense that if the interest on a 5 year bond is only paid at maturity, then the interest is taxed at the point of maturity. In all cases where the interest is credited annually or monthly it also makes perfect sense that the interest is taxed during the tax year in which it is credited - particularly if a "Statement of Interest" is issued by the provider showing the tax year in which the interest was credited. Can you confirm that your advice is that I should ignore my statements that will show I received £200 interest for tax year 2022/23 and £480 for each tax year 2023/24 through to 2026/27 and £280 in 2027/28 and instead declare that I received all of the interest in 2027/28?

@Tommy Leung The example you mention (SAIM2440) clearly states that the interest arises and is taxable each year: "Since the terms and conditions of the bond allow Sam to draw on the funds, although with a penalty, the interest arises and is taxable each year as it is credited" So your situation, based on that example, seems to me, to be that you do declare year 1 and year 2 separately. It does not make any sense to me that it would only arise at the end of the term but the feedback on my query is still unclear to me - though the last response does say "received OR made available". To me I have received the interest when it appears in my account (whether I can access it or not) and certainly if the provider sends me a statement showing my interest for the tax year, I would expect to report that amount to HMRC and not withhold those receipts until the end of the term.