Trust bond and tax


#1

Which tax rules apply to interest received from the 5% Trust bond when held outside of an ISA?

Do any personal allowances apply below which no tax would be due?

Thanks


#2

Dozens won’t be able to answer this due to regulation regarding financial advice.

My understanding is, If you receive less then £2500 in interest you will need to call HMRC and declare it - can be done and paid for over the phone (may change tax code, or just lump it). More then that (highly unlikely), you’d need to do Self Assessment.

If you already do Self Assessment you would need to declare it.

Circumstances are personal and I’m not a qualified financial expert merely an amateur, it would be best to check with a financial advisor if you’re really unsure.


#3

I’m not asking for personal advice.

Lots of investment platforms provide general or indicative information on what tax issues may be relevant for the investments they provide, e.g.

https://www.vanguardinvestor.co.uk/need-help/answer/what-taxes-will-i-have-to-pay-on-investments

https://support.fundingcircle.com/hc/en-us/articles/214636966-What-are-the-tax-consequences-of-lending-as-an-individual-?mobile_site=true

The information I’m after is what rules apply and what allowances may apply so I can calculate for myself, rather then how to declare. A link to the relevent documant or documents on HMRCs website would suffice.


#4

Blockquote Note that we can’t provide you with tax advice, as everyone’s tax status is unique to them and depends upon your individual circumstances. Please also note that your tax status and tax treatment of products may change over time.


#5

Would you have to declare even if you are within your Personal Savings Allowance (obviously dependant on your total income).


#6

You won’t qualify for PSA with an NEX bond.


#7

Right, just wasn’t sure if the fact that it was a Fixed % Bond (albeit NEX) would make a difference.

I’m putting it into an ISA so won’t have this issue. Like has been said on the Monzo Forum as well as here, although Dozens may not be able to provide personalised tax guidance I feel like breaking this down further would show some more transparency - as you are going to get a lot of attention with the 5% headline rate.


#8

Here’s a good guide on how to work it out.

https://www.which.co.uk/money/tax/capital-gains-tax/capital-gains-tax-allowances-and-rates-a0muq0c65cd7.

Scroll down to the calculate bit.

(For the avoidance of doubt the allowance includes your salary.)


#9

Appreciate we are all scrabbling around in the dark a little here - But can you elaborate on this part (receive less than £2,500 in interest)?

2 things I’d like clearing up if you know…

  1. PSA (personal savings allowance) - Whether it’s £1,000 or £500, if your total interest payments are below this, I thought you didn’t need to do anything at all? Do you have a source for the exclusion of NEX bonds (it always sounds so salty asking for a source, it’s genuine interest :smiley: )

  2. The CGT figures on the link state:

The capital gains tax allowance in 2018-19 is £11,700, rising to £12,000 in 2019-20. This is the amount of profit you can make from an asset this tax year before any tax is payable.

I’m sure I’m confusing many things here, but how does that relate to the 5% trust bonds?

Also… Are you saying that someone earning over £11,700 (in salary), will definitely have to pay a fee on any interest they earn from the Trust Bonds (unless it’s in an ISA)?


#10

Doesn’t apply because it isn’t technically a savings product. Although I’d be intrigued if anyone could point me otherwise.

I discussed this with a Monzo user back on the Monzo forum (Dozens thread post 660 ish), but essentially:


#11

OK - I’ll speak to my tax man and see if he can clarify these things.

I know Dozens can’t be seen to be advising, but I really think they should have some “cheat sheets” which explain some basics (the kind you’d find at which etc).

If the above is true, and if your bonds aren’t in an ISA, I bet a lot of people won’t realise you need to pay CGT on the 5% you make from the trust bonds.

The fact we are all going around in a circle to a degree, highlights the complexity of it.


#12

Is the Bond, as it is giving a Fixed % Rate - not therefore classed as a Fixed Rate Savings Bond and therefore taxed in-line with what @Nick has said?

I’m just not sure the interest would/could be classed as income?

I’m genuinely interested in the ins and outs of the taxation on these so that’s why I’m badgering :rofl::rofl: sorry!


#13

The only thing I’d say about that (and as you can tell, it’s a guess), would be the “guarantee” is coming from Dozens, not the product.

Almost like a verbal deal, rather than an actual deal.


#14

Yeah this is the point I’m confused on - at the end of the day no matter what we are getting 5% on the investment so I would see that as a Savings Bond.

If the CGT applies, do you not have £11,700 CGT Allowance?


#15

Looking at this example, it looks like your salary plays a part…

  • Your total taxable income is £40,000 - £11,850 = £28,150
  • Your taxable gain is £20,000 - £11,700 = £8,300
  • Your taxable income and taxable gain total = £36,450
  • The first £6,350 of your profit (£34,500 - £28,150) is taxed at 10%
  • The final £1,950 of profit from the shares will be charged at 20%

#16

Oh no I appreciated that what % you pay is based on your income but who is going to make £11,700+ on the 5%? It may make other investments you have go over the total, but that isn’t really the target market of Dozens.


#17

Genuinely have no idea.

I’ve got a call with my mate whose a tax advisor in an hour, so hopefully he’ll clear this up!


#18

Its weird because are we actually buying a Bond or a Bond through Dozens? I think the set-up of what we are buying is crucial - I know they’re on NEX but is the Bond 5% or does that fluctuate outside of our 5%?

Would be good to know what your friend thinks!


#19

Report back. I’d be intrigued to hear your findings.


#20

I imagine my butchering of the explanation probably won’t help him - I also doubt he’ll have come across this type of question very much.

We also don’t have full clarity over exactly what the Dozens bonds are? - As far as HMRC are concerned, are we, as customers, simply investing in NEX bonds, and only we know they are guaranteed at 5%?