Santander 123 account interest payments.

Well I finally got some answers from Santander. They wanted £10 to give a complete breakdown - but waived the sum after a little persuasion.

Firstly the monthly average balance is meaningless - so why include it?

The breakdown I got covered every day in the month and they take the daily closing balance and multiply by 2.96%(if over £3k and to a max of £20k) and divide by 365(366 days in a leap year) to get the daily interest accrued.

Interestingly they have two columns, one showing gross interest and the other with the 20% tax deducted. However you are credited with the gross amount. Could be close to £600pa

So that means, like most of us, I will have to get my accountant to declare the gross interest on my Tax return and have 50% deducted - thank goodness it will drop to a 45% deduction in April;)

innovate wrote: »

Are you registered to receive gross interest?

Source: clause 20 of the Santander general T&Cs

No!

Indeed Tax has been deducted from all the Esaver accounts I have had with Santander. e.g. on closing my last account

26/11/2012 INTEREST PAID AFTER TAX 125.71 DEDUCTED

The two previous current accounts(before changing to the 123 account) were the Santander Account and the Zero Account and both used to pay a very low interest rate on credit balances. Looking at old statements, both of these used to pay the interest Gross each month. For example:

Interest paid after tax 0.00 deducted - £1.06

Incidentally my wife and daughter both have Santander current accounts and Esavers and those accounts are the same as mine - 20% tax deducted on Esaver and current account interest paid gross.

I also have current accounts with other banks/BS and I am pretty certain that interest is also paid gross; albeit small amounts as they are only used as a conduit to saving accounts.

Be interesting to see if others get interest on 123 account paid Gross.

innovate wrote: »

I have a 123, and I always had my interest paid after tax (statement says "Interest paid after xx.xx tax deducted").

Similar on my Halifax, Lloyds and BoS current accounts - basic rate tax is always withheld from the interest (or 'reward') paid.

How strange.

I have only had two statements. Both state 'interest paid after Tax 0.00 deducted'

The daily breakdown I have received for the two months has 3 columns showing - Gross Interest - Tax - Net interest - and each payment credited has been the Gross Interest.

My accounts(including current account) were transferred to Santanter from Alliance and Leicester - I wonder if that makes any difference to the codes on the computer?? Although I was never registered to receive gross interest with A & L, indeed as a higher rate tax payer I faithfully declared all interest with the standard rate deducted on my tax return.