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  • FIRST POST
    • Cardew
    • By Cardew 24th Jan 13, 2:16 PM
    • 25,599Posts
    • 12,215Thanks
    Cardew
    Santander 123 account interest payments.
    • #1
    • 24th Jan 13, 2:16 PM
    Santander 123 account interest payments. 24th Jan 13 at 2:16 PM
    I have been unable to work out how Santander calculate their interest payments.

    The promotional literature for the 123 account states the following:


    Interest - on your current account balance:
    • 1.00% AER/gross (variable) on balances from £1,000
    • 2.00% AER/1.98% gross (variable) on balances from £2,000
    • 3.00% AER/2.96% gross (variable) on balances from £3,000 and up to a maximum
      of £20,000.
    Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account
    I sent this secure message to Santander


    Can you please explain how the 3% interest on balances in the 123 account works please.

    Your leaflet states: Interest - on your current account balance: "
    1.00% AER/gross (variable) on balances from £1,000

    2.00% AER/1.98% gross (variable) on balances from £2,000

    3.00% AER/2.96% gross (variable) on balances from £3,000 and up to a maximum of £20,000.

    Interest rates will apply on the first £20,000 of your entire balance once you have at least £1,000 in your account."

    If I have an average balance of, say, exactly £10,000 for the month. Do I get?:

    £1,000 x 1% divided by 12

    £2,000 x 2% divided by 12

    £7,000 x 3% divided by 12

    Or £10,000 x 3% divided by 12.
    It did occur to me that it could mean no interest on the first £1,000, then 1% from £1,001 to £2,000, and 2% from £2,001 to £3,000 and 3% from £3,001 to £20,000.

    Their reply:




    Thank you for your email.

    I can confirm that if your balance is an average of £10,000 you will receive 3% Gross interest on the full balance.
    I hope this information is useful and if you have any other queries,
    This seems not to be happening for my account so I sent the following:


    Good afternoon and thank you for your prompt reply. I cannot reconcile your reply with the interest received on the two satements I have received since starting the 123 account.

    My Statement of 16 Jan 2013 shows an average credit
    balance of £13,994.85 and interest paid from 15/12/12 to 15/01/13 was £32.70.

    By my calculations £13,994.85 x 3% divided by 12 is £34.99 - a difference of £2.29

    My 15 Dec 2012 statement shows an average credit balance of £6,000.81 and interest paid of £13.72.

    Again by my calculations £6,000.81 x 3% divided by 12
    gives interest of £15 thus a difference of £1.28

    Could you please explain where our methods differ and if I(or you) are making a mistake.
    Anyone got any thoughts on this situation?
Page 2
    • richardmk
    • By richardmk 26th Jan 13, 12:42 PM
    • 131 Posts
    • 56 Thanks
    richardmk
    If at any time the balance was below the £3000 threshold, interest would accrue at the the 0% on days below £1000, 1% on days below £2000, and 2% on days below £2000.
    • SnowTiger
    • By SnowTiger 26th Jan 13, 1:28 PM
    • 2,724 Posts
    • 1,730 Thanks
    SnowTiger
    Santander (and other banks) calculate interest on a daily basis. See their T&Cs.
    Originally posted by innovate
    Nice bit of trimming there. Nice. Very nice.

    I expected that response from you, as a long-time Santander defender. I was, therefore, careful with my wording.

    I wrote:

    The Average balance for the month figures Santander give on my first 123 statement and previous Preferred Account statements don't appear to be what I would expect: the total of the balance at the end of each day divided by the number of days during the statement period.

    So, I'd guess Santander uses some other way to calculate it.
    Note that I was clearly referring to the Average balance for the month figure.

    As I said, nice try.
  • rb10
    Thoughts?
    Originally posted by Cardew
    Impossible to comment further with the information given. I don't personally fully believe their 'average' figure, so would prefer to calculate the interest from scratch.

    Happy to help further if you post (or send me a PM with) your daily closing balances (as per your statement), along with details of any cheques paid in during the period.
    • Cardew
    • By Cardew 9th Feb 13, 9:44 PM
    • 25,599 Posts
    • 12,215 Thanks
    Cardew
    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
    However you are credited with the gross amount.
    Originally posted by Cardew
    Are you registered to receive gross interest?

    You may be able to register with us to receive interest gross. Otherwise interest will be paid net of income tax at the prescribed rate. Where you are a higher rate or additional rate tax payer, you may be liable to pay additional tax on any interest we pay to you.
    Other taxes or costs may exist that are not paid via us or imposed by us. It is your responsibility to ensure that this tax is paid.
    Source: clause 20 of the Santander general T&Cs
    • Cardew
    • By Cardew 9th Feb 13, 11:03 PM
    • 25,599 Posts
    • 12,215 Thanks
    Cardew
    Are you registered to receive gross interest?

    Source: clause 20 of the Santander general T&Cs
    Originally posted by innovate
    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.
    Last edited by Cardew; 09-02-2013 at 11:06 PM.
  • innovate
    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.
    • fiesta04
    • By fiesta04 10th Feb 13, 1:26 AM
    • 486 Posts
    • 292 Thanks
    fiesta04
    Same here

    F4
    • Wyndham
    • By Wyndham 10th Feb 13, 7:44 AM
    • 1,919 Posts
    • 2,152 Thanks
    Wyndham
    Mine is paid nett too. Cashback doesn't have tax deducted, but I understand that it is not taxable income?
    • Cardew
    • By Cardew 10th Feb 13, 9:58 AM
    • 25,599 Posts
    • 12,215 Thanks
    Cardew
    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.
    Originally posted by innovate
    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.
  • innovate
    Could have something to do with your account having its roots in A&L. Wasn't there some huge issue with the transfers of these accounts?

    My 123 is a 'virgin' Santander account, opened around this time last year.
    • notbritishgas
    • By notbritishgas 10th Feb 13, 4:34 PM
    • 1,959 Posts
    • 850 Thanks
    notbritishgas
    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.
    Originally posted by Cardew
    My account was formerly A&L, converted to Santander Premier Direct Travel, and recently converted again to 123.
    I have just received my first Cashback and interest, my interest is shown as

    INTEREST PAID AFTER TAX 0.82 DEDUCTED

    Yours sounds as if interest has been paid gross.
    • Cardew
    • By Cardew 10th Feb 13, 9:52 PM
    • 25,599 Posts
    • 12,215 Thanks
    Cardew
    My account was formerly A&L, converted to Santander Premier Direct Travel, and recently converted again to 123.
    I have just received my first Cashback and interest, my interest is shown as

    INTEREST PAID AFTER TAX 0.82 DEDUCTED

    Yours sounds as if interest has been paid gross.
    Originally posted by notbritishgas
    Yes without doubt I have been paid gross on the 123 account; and I cannot understand why that would happen. I have never registered to receive gross interest on a bank account - ever.

    It is especially surprising because since I opened the 123 account, I closed a Santander on-line saver account (it had reached the end of 12 month bonus period) and the interest was paid Nett i.e. "26/11/2012 INTEREST PAID AFTER TAX 125.71 DEDUCTED"

    Not that it is a problem, I will sort it out at end of Tax Year.
  • rb10
    Not that it is a problem, I will sort it out at end of Tax Year.
    Originally posted by Cardew
    It's simpler to sort it out now - Santander may be able to deduct the tax right away. If you wait until April you'll have to send a form to HMRC and wait for them to send a refund.
    • Cardew
    • By Cardew 10th Feb 13, 9:58 PM
    • 25,599 Posts
    • 12,215 Thanks
    Cardew
    It's simpler to sort it out now - Santander may be able to deduct the tax right away. If you wait until April you'll have to send a form to HMRC and wait for them to send a refund.
    Originally posted by rb10
    A refund??

    I will owe HMRC the tax!
  • rb10
    A refund??

    I will owe HMRC the tax!
    Originally posted by Cardew
    Of course ... sorry.

    It's still simpler to get Santander to sort it now (by just amending your account).

    If you wait until April, then HMRC will amend your tax code (possibly for the rest of 2013/14, otherwise it may be for 2014/15.
    • notbritishgas
    • By notbritishgas 11th Feb 13, 8:11 AM
    • 1,959 Posts
    • 850 Thanks
    notbritishgas
    Yes without doubt I have been paid gross on the 123 account; and I cannot understand why that would happen. I have never registered to receive gross interest on a bank account - ever.

    It is especially surprising because since I opened the 123 account, I closed a Santander on-line saver account (it had reached the end of 12 month bonus period) and the interest was paid Nett i.e. "26/11/2012 INTEREST PAID AFTER TAX 125.71 DEDUCTED"

    Not that it is a problem, I will sort it out at end of Tax Year.
    Originally posted by Cardew
    When I converted my account to the 123 I did it in branch and as it is a joint account with my wife who is a non tax payer i wanted them to confirm the R85 authority was transferred over. They looked on screen and pointed out the box with a tick in that confirmed it.

    If you have a Santander nearby perhaps a visit will clear it up.
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