That depends on how the bond is structured. Some multi-year fixed bonds pay the interest only at maturity, others pay it at intervals, which could be annually or more frequently.
Tax is due when the interest is paid (i.e. when it is credited to the account). That's why it's usually deducted at source and credited net.
You pay tax in the tax year in which the interest is paid into the account, not when it's taken out.
Suppose you have a 2 year bond starting on 1st July 2009 which pays interest quarterly, on the last days of September, December, March, and June. Then three payments would be taxed in the 2009/10 tax year, four in 2010/11, and one in 2011/12. This applies whether the person withdraws the interest or not.
It would be unusual to assume that, because if the person's income is so low that he pays no tax at all, then his savings interest is not going to be taxed either, and then your two questions become irrelevant.
When you make the declaration to the bank to allow interest to be paid gross, the "income" you declare to be below the allowances should be the income *including* the anticipated interest.
Of course circumstances could change, and the person's income could increase above the allowances at a later date, so perhaps your questions relate to that type of situation.