National Savings & Investments has waited two years to notify clients of a material change in interest payments on its Guaranteed Growth Bonds, which could mean I will pay tax twice. I received an email at the end of April informing me that the interest on two, three and five year bonds, bought or renewed, after May 1, 2020, will be applied in the year of maturity of the bond, rather than annually as before. Ignoring this, I have continued to report interest annually to HM Revenue & Customs since 2019, so I may well be double taxed when my obligations come due.
NS&I’s policy change removed the right of clients to cash in their two, three and five year bonds before the end of the fixed term, and those with two year bonds may not have realized the impact on their tax obligations than now. It is not just a question of double payments. Interest charged as a lump sum at bond maturity, rather than spread annually, could cause some savers to lose their personal savings allowance and make them taxable.
A lump sum could also shift some into a higher income tax bracket, meaning their personal savings allowance would be halved to £ 500 or, for the higher bracket, removed, while ‘they would be subject to higher capital gains and dividend tax. NS&I admits the changes were initially unclear for clients investing or renewing between May 1 and September 1, 2019. It was not until the end of April of this year that they emailed all clients. to explain how the tax treatment now worked.
And then he failed to mention that they could cash out their credit, without penalty, within 30 days if they objected to the new terms. “We recognize that we could have been clearer in explaining the tax treatment of these clients,” he says. “NS&I apologizes to anyone who thinks they have invested without having all the relevant information.”
Always check what interest has actually been paid before reporting it to HMRC, who can make adjustments for overpayments.
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