Building Society Penalties

Building Society

It is advisable to check certificates of tax deductions from your building society, especially if you have been using them for entries on 2003/4 tax returns. This is because if you decide to transfer your account to get a better interest rate then you may suffer a penalty of three months interest or more, however this is not the end of the matter. When the building society issues the interest certificate they advise the taxman the full sum of interest and don't subtract the penalty. When you query your building society they will usually regard the penalty as a 'deduction from the capital repaid' or something similar. And you may end up paying three months worth of interest that you never got to keep.

Tax Return

The terms and conditions from your building society must be read very carefully as most refer to 'loss of interest' if penalties are incurred. If you have any doubt as to the treatment it is advised to deduct the penalty interest and explain this in the white space on your tax return.