The Lemon Fool

I am looking for a 2- or 3-year fixed rate bond where interest is payable only at the end of the term.

Looking at those I currently hold, (Kent Reliance, Paragon & Coventry BS), then the choice is between annual or monthly interest payments, not at the end of term.

Does anyone know if these exist ?

mike wrote:I am looking for a 2- or 3-year fixed rate bond where interest is payable only at the end of the term.

Looking at those I currently hold, (Kent Reliance, Paragon & Coventry BS), then the choice is between annual or monthly interest payments, not at the end of term.

Does anyone know if these exist ?

If your motivation here is taxation, then as long as there is no possible access to the interest until the end of the term then you will be taxed on the whole of the interest gained when the bond matures, irrespective of when it was credited to the account.

Some responses from HMRC staff on the matter, and links to HMRC manual, here: https://community.hmrc.gov.uk/customerforums/pt/097f17c5-77af-ed11-9ac4-00155d975688

(Not that every bank seems to know that; I just received a tax certificate for interest credited last tax year on a no possible access 9 month fixed a/c that matures in this tax year...)

mc2fool wrote:

mike wrote:I am looking for a 2- or 3-year fixed rate bond where interest is payable only at the end of the term.

Looking at those I currently hold, (Kent Reliance, Paragon & Coventry BS), then the choice is between annual or monthly interest payments, not at the end of term.

Does anyone know if these exist ?

If your motivation here is taxation, then as long as there is no possible access to the interest until the end of the term then you will be taxed on the whole of the interest gained when the bond matures, irrespective of when it was credited to the account.

Some responses from HMRC staff on the matter, and links to HMRC manual, here: https://community.hmrc.gov.uk/customerforums/pt/097f17c5-77af-ed11-9ac4-00155d975688

Thanks mc2, and yes, my motivation is taxation as I benefit from the £5,000 starting rate of 0% plus the £1,000 tax free on savings.

With the increase in current interest rates and the state pension next year being above the personal allowance, the forecast reduction in rates next year and me having less cash will mean it would be beneficial to have the interest subject to the available tax reliefs in 2025/26 or later. If these reliefs are reformed/removed with a change of government, I would be in no worse a position tax-wise than I would be if I received some of the interest subject to tax under the current ystem in 2024/25.

mc2fool wrote:(Not that every bank seems to know that; I just received a tax certificate for interest credited last tax year on a no possible access 9 month fixed a/c that matures in this tax year...)

How does one deal with this ? I assume the institution will have informed HMRC of the interest credited, and hence they would expect you to include this on your SA. Does this not raise a red flag with HMRC ? Or perhaps this is where the "Additional information" boxes come in useful !

mike wrote:

mc2fool wrote:(Not that every bank seems to know that; I just received a tax certificate for interest credited last tax year on a no possible access 9 month fixed a/c that matures in this tax year...)

How does one deal with this ? I assume the institution will have informed HMRC of the interest credited, and hence they would expect you to include this on your SA. Does this not raise a red flag with HMRC ? Or perhaps this is where the "Additional information" boxes come in useful !

It's a good point and one I have been debating with myself as to whether to tell said bank (Shawbrook) that their tax certificate (and informing to HMRC) is wrong, and get into an inevitable uphill slog about it, or simply to "follow" the certificate and declare the amount they ascribe to my return for last year.

It won't make any real difference to me overall, I'm in the 20% bracket for interest (savings allowance used up already), with just me having that portion taxed a year earlier than it would have been, so ... I dunno what I'll do about it yet.