rl11

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.

If interest only arises at the end of the term (over 1 year) shouldn't banks/building societies be advised by HMRC NOT to send a certificate of interest until the interest is accessible? - end of term or when account is closed. Or it it a case that if they do issue an annual certificate of interest, you should report the amount the bank says you have received on your annual return?

Sorry to persist with this query but it makes no logical sense that the interest only "arises" at the end of a long term. I receive interest into my bond account each month. It shows in my account dated at the point of receipt. It is my interest at that point. In April the bond provider will send me a "Statement of Interest" showing the interest I have received during the tax year. I am expected to NOT declare the interest I have received each year until the bond matures in 2027 - at which point I declare 5 years worth of interest. Even though I have only received £500 per year (half my annual PSA of £1,000), because the whole 5 years of interest amounts to approx £2,500, I will have to pay tax on £1,500. Is it possible to have someone review the way this works as it makes no sense and is totally unfair. I doubt that anyone taking out a long term bond even realises this and would logically report the interest their provider shows on the annual statement each year

Thanks for the link to the manual. Makes interesting (no pun intended) reading... 1. “A person may be taxable on interest even if they cannot withdraw and spend the money.” 2. “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.” Can I have option 1 please?

Thanks; It seems that I have no option but to have the interest paid out of the account, so that the interest I receive each month will be taxed each tax year, rather than all in one go at the end of 5 years. This certainly seems like a flaw in the system, that I believe should be changed. As things currently stand, compounding the interest in a 5 year bond means my annual psa would go completely unused for 4 years. That cannot be right.