rl11

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.

One further query; if the provider sends me an annual "Statement of Interest", showing interest earned for each tax year, should I declare the interest earned in each tax year, or should I defer declaration of each years interest until the end of the fixed term?

Note that I can close the account (and therefore withdraw the funds) if the t&c's or charges change or under "special circumstances" agreed with the provider but I can't see e.g. a way to withdraw if I pay a penalty

I will have no access to the principal sum for 5 years. The interest I can have paid out to a different account or I can have it paid into the same account, so the interest can compound. I want to have the interest compounded, to benefit most from the 5 year term. But if the interest is only taxable after 5 years I will have to pay tax, whereas if I pay tax on what I receive each month, I would not. This does not seem to make any sense. I can see the interest being received into my 5 year account each month, so I don't understand why it is not taxable at the point of receipt? If we went back to the days when interest was paid net, I would be taxed each month (i.e. I would receive interest less 20% tax) and then claim back the tax at a later date. Why are things different now interest is paid gross, for a long term savings account?

I have read through a couple of threads on this subject (and trawled the internet) but am still unclear on how the taxation on interest would work. I have a 5 year fixed rate bond with a 5% AER - it started in November 2022 and matures in November 2027. I have opted for the interest to be paid Monthly into the same account so the interest can compound - and I can see it being credited. Each month the account is credited with approx £40 interest. My expectation was that for Tax year 2022/23 I would declare 5 months interest (credited 1st Dec to 1st April) and for most of the following years it would be 12 months of credits with a final 7 months of credits (May 1st to Nov 1st 2027). This to me makes perfect sense. I have now been confused by some information posted on the moneysavingexpert forum that says the interest would in fact, all need to be declared at the end of the 5 year term, with nothing being declared until then, since I cannot access the interest until the fund matures in November 2027, if the interest is added to the same account. If it's left until the very end to declare all of the interest, I will have to pay tax on the interest, since it will exceed my PSA, being the total interest will be approx £2,500 but to my mind, I am only receiving £500 per year, which would be under my PSA for each year. I do have the option to have the interest paid out but that would reduce the benefit of compounding. 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?