If interest from a savings account is paid annually in the middle of a tax-year, should the full amount be reported on the tax-return for the year it is received, or do/can/should you pro-rata the interest for the portion of the tax-year that overlaps the interest-paying year?
Example
In August 2015 you deposit £25,000 in a fixed-term savings account which pays interest annually. The first payment (~£660) will have been in August 2016, in the middle of the 2016/17 tax-year. When making a self-assessment return for 2016/17, should you report the full £660 or the proportion earned during that tax-year (overlap of 4 months; approx £220)?
Note: Assume a higher-rate tax-payer, so a Personal Savings Allowance of £500 (not £1,000) will have applied from April 2016.
Where the savings balance is fixed for a number of years, I suspect the simplest is to report the whole amount, as the overlaps with the tax-years at the beginning and end of the fixed-period will cancel out... if you were to pro-rata it this year, you should presumably back-date the remainder to the previous year's return (and include part of the August 2017 payment in this year's return). However, is this the correct/acceptable way of doing things?
