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  • RE: Tax on interest on long term fixed rate bond

    @ HMRC Admin 25 I am afraid that the saim2440 examples are not clear enough or exhaustive enough. And I have this frustration with a lot of the HMRC manuals and guidance, to be honest. I am trying to conjure a single paragraph which covers everything (for the sake of all of us). I am sure that's possible. I just need your specific responses to ensure it's correct, please. Thanks
  • FSCS Limit - treatment of accrued interest

    Hi, When making fixed-term deposits, I need to assess what happens in the case of bank default and accrued interest. My understanding is that: 1) Accrued interest is compensated up until the date of bank insolvency (and SAIM2095 and SAIM2085 seem to both agree with this) – i.e. you do not lose your accrued interest in the event of bank default. 2) The £85k FSCS limit is a cap on ALL money (INCLUDING any accrued interest not yet paid). For example, If I deposit £81,340 into a bank for 1 year at 4.5%, and that bank defaults just before my deposit matures, FSCS would give me back by £81,340 (account balance), plus the £81,340 x 4.5% £3,660 of accrued interest I am due. Since the addition of these amounts comes to exactly £85,000, I get that amount. If however, I had deposited £85,000 instead, I would get NO accrued interest from FSCS, only since my deposit alone hits the £85k cap. I am trying to clarify point 2 (my main question being: “Should I stick to a deposit of £81,340 for safety, or could I deposit £85,000 instead and still be fully protected by FSCS?”), but SAIM2090 is not helping me clarify, since a) I cannot get useful information with example 3 (Mr F) other than compensation is capped (which we all know), since £75k is just way more than the £50k limit at that time, and b) example 2 (Mr E) is really confusing since it makes no reference to any kind of FSCS limit at all (though he seems to be paid accrued interest as I would expect) and £89k is way over! Thanks
  • RE: Tax on interest on long term fixed rate bond

    I have tried to summarise my understanding of this entire issue in a single paragraph. It would be wonderful if HMRC Admin would confirm (or tell me where I am going wrong): My summary: Interest on bank accounts is taxable only in the tax year that it is ‘accessible’. Interest is generally always ‘accessible’ in the case of easy access or notice accounts. When it comes to fixed-rate accounts however, interest will not be taxable until the tax year that the product MATURES, provided that any interest is 1) credited to the account (not paid to an external account), and 2) where neither principal nor interest can be accessed until maturity (and account terms can never be changed), and 3) where the account cannot be closed early (even by paying a penalty), All of these conditions need to be satisfied, else interest is taxable in the year it is received (whether that be credited to the account, or paid out). Clearly, these rules are more important for fixed-rate accounts with an original tenor of 18 months and beyond / where interest could ‘move’ from one tax year to the next for the purposes of income tax. Thanks
  • RE: Tax on interest on long term fixed rate bond

    Seems to be getting complicated. Not wishing to add to the complexity but if this is mainly about 'accessibility'. I have a question about another account type... Let's say I have a 120-day NOTICE account (not a fixed rate account), paying monthly interest (on the 10th of each month). credited to the same account, and the account has been open for 2 years (thus far). As per Ts&Cs, Interest is compounded and not accessible until notice has been given and ellapsed. I would think that interest on my tax return should be the summation of interest credited from Apr 10 to Mar 10 inclusive for each tax year, But the above seems to suggest that it's not that straightforward, and I should start pushing the Dec 10 to Mar 10 interest into the NEW tax year (past Apr 5), given that these amounts would not have been 'accessible' before Apr 5 (due to the notice period, and notice not have been given). Is that really the case?? I hope not, given the administrative challenge this would cause. Thanks