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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a deferred income bond paying 10% per annum over 5

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I have a deferred income bond paying 10% per annum over 5 years.
Bond is for £40,ooo, which will give me £ 20,000 on maturity.
my interest allowance is £5,000 per annum.
Do i pay no tax on this as it is below my £5,000 each year, in other words, can i let the annual interest accumulate

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Interest is taxable when it is paid so if it is paid in each tax year, then the allowance will be applied to it accordingly. If you get all the interest at the end which the word "deferred" implies then it will be taxed in the tax year when the bond matures. Your annual allowance will then be applied to that. You cannot carry forward an unused annual allowance.

I hope this clarifies things for you but let me know if you have any further questions.

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