In a fixed-term savings account of more than a one-year term, interest is usually credited annually and not withdrawn until the end of the fixed term.

When should the interest be declared for tax?

If declared annually it might not exceed the new £1,000 personal savings  allowance (PSA), but if declared as one final amount the annual allowance could be exceeded and some benefit lost.

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Since April 6, basic rate taxpayers can earn £1,000 interest each year before being taxed and higher-rate taxpayers have a £500 allowance. As fixed term savings accounts can pay interest monthly, annually or on maturity, lots of readers have contacted Telegraph Money confused as to how it will impact their PSA.  

According to HMRC, it does not matter when the interest is credited to your account. Rather, it boils down to when the interest is made available  or when it becomes free to withdraw. This is an important feature of fixed term savings accounts as not all permit access.