Tax depends on your personal circumstances and if in doubt you should seek professional advice. We cannot offer advice on tax. The tax summary we provide relates to the position of a UK resident individual taxpayer (not including trustees or personal representatives). Other categories of taxpayer should consider their own circumstances.
Is any tax withheld from my Cash Returns?
Current rules from HMRC require that all companies or Local Authorities 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. See below for exceptions to this.
For any investments issued after 6 April 2017, 20% of your interest payments on Abundance will be deducted and paid to HMRC directly.
Any investment issued before 6 April 2017 currently pays Cash Returns gross with no tax withheld and will continue to do so until further notice. We are currently in discussions with HMRC on whether to and if so, how best to implement withholding tax on these investments and will update Abundance members if this is the case.
ISA: Investments held in an Abundance Innovative Finance ISA will not have withholding tax deducted as returns within an ISA are tax free.
Companies: Investments held by company accounts on Abundance (where the company is a UK incorporated and resident company) will not have withholding tax deducted.
Variable return investments: No tax is deducted for Cash Returns 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.