Why this tax on sav­ings in­ter­est?

The Daily Telegraph - Your Money - - READERS’ LETTERS -

On Fe­bru­ary 8 In­vestec Bank wrote to my daugh­ter and me re­gard­ing the ma­tu­rity on Fe­bru­ary 29 of a fixed-term de­posit ac­count that we held jointly.

It set out var­i­ous op­tions and we re­sponded on Fe­bru­ary 19 say­ing that the money was to be placed in an easy-ac­cess ac­count.

In­vestec did not re­ply but it later turned out that this ac­count was just an on­line one and so not avail­able to us. The money was there­fore placed in a hold­ing ac­count on which no in­ter­est would be paid.

Aware of the im­mi­nent im­ple­men­ta­tion of the per­sonal sav­ings al­lowance on April 6, af­ter which any in­ter­est due from banks and build­ing so­ci­eties would be paid gross, we jointly de­cided to de­lay clo­sure un­til the new tax year. SB, SUR­REY

You wrote with in­struc­tions to close the new ac­count on April 7 but were sur­prised when you dis­cov­ered that 20pc in­come tax had been de­ducted from the in­ter­est on the ma­tured bond.

You ob­jected that you thought any tax li­a­bil­ity ap­plied in the tax year in which in­ter­est is paid.

In­vestec ex­plained that, as the de­posit had ma­tured in the pre­vi­ous tax year, in­ter­est ap­plied to that year.

How­ever, it then said, fol­low­ing my in­quiry, that your re­cent

cor­re­spon­dence had not been dealt with in ac­cor­dance with its usual high stan­dards. Ad­di­tion­ally it could find no clear ex­pla­na­tion as to why it took 10 days to re­lease the funds.

In recog­ni­tion of these points it of­fered a good­will ges­ture of £100.

There was though a sub­se­quent de­lay in mak­ing that pay­ment and in re­spect of this it has in­creased the sum to £200.

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