Please note
Tax treatment depends on your individual circumstances and may be subject to change in the future. This summary is provided for informational purposes only and relates to the position of a UK resident individual taxpayer. We do not offer advice on tax and if you are in doubt about your own position you should seek professional advice.
Is any tax withheld from my investment returns?
Yes, in some cases tax is deducted at source from your interest payments, but this only applies to certain investments on Abundance.
Current rules from HMRC require that companies or councils issuing debentures or bonds must withhold a proportion of interest payments equivalent to the basic rate of income tax (currently 20%) and pay this to HMRC directly. Therefore for some of the investments on Abundance, 20% of your interest payments will be deducted and paid to HMRC directly.
Tax will be deducted from the following investments on Abundance:
A debenture issued by a company after 6 April 2017.
A debenture issued by a council after 6 April 2017. On Abundance, this is only the West Berkshire 2025 and Warrington 2025 investments issued in 2020.
Tax will not be deducted from the following investments on Abundance:
Any debenture issued by a company before 6 April 2017. These investments currently pay interest gross and will continue to do so until further notice (subject to HMRC).
A loan offered by a council. New council investments on Abundance from 2021 are structured as p2p loans and the council is not required to deduct tax.
Bonus interest paid by Abundance
Please check the details of each investment to find out if tax is deducted.
Exceptions
Investments held in an IF ISA: Investments held in an Abundance Innovative Finance ISA will not have tax deducted as returns within an ISA are tax free.
Investments held in a SIPP: Investments held in a pension (SIPP) will not have tax deducted as returns within a pension are tax free.
Investments held by a company: Investments held by company accounts on Abundance (where the company is a UK incorporated and resident company) will not have tax deducted.
Variable return investments: No tax is deducted for investment return from a variable return investment as your return is treated as a dividend in this instance, not interest.
How do I reclaim tax withheld?
Most people can earn some interest from their savings without paying tax. Your allowance for earning interest tax-free is made up of your Personal Allowance, your starting rate for savings (depends on your other income) and Personal Savings Allowance (depends on your Income Tax band). You can find out more here.
You can reclaim tax deducted from your interest on Abundance if the amount deducted exceeds your actual tax liability (taking into account allowances available to you). You must reclaim your tax within 4 years of the end of the relevant tax year. You can reclaim tax either through your Self Assessment tax return or by completing form R40 and sending it to HMRC (this can be by paper or online). It normally takes 6 weeks to get the tax back.