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I have some money invested in a three-year bond with an offshore bank, and the interest will be paid at the end of that period. I have opted not to have the tax withheld. Does anyone know if I can spread this over three years' tax allowance (in which case I wouldn't owe anything because I'd stay below the threshold each year), or will I have to pay tax on the whole lot in the year I receive it?
 

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Interest income is taxed in the tax year it is received, after offsetting that years personal tax allowances. You cannot carry forward unused personal allowances from previous years. This applies in both Spain and the UK. Sometimes interest on fixed rate bonds is added to the actual bond, I.e paid but not drawn. Under these circumstances the interest is received in the year in which it is paid, even if it is not drawn.
 
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