Can anyone tell me if this is correct

glitterygert

I have £10.000 in Kaupthing Edge, which I do not draw the interest from, the first month I got 2 days int which made my bal. £10.004.15,the second month (full month) int. £41.25, bal. now £10.045.67, third month int. £43.17, bal. now £10.088.84.

Would anyone know if this is correct, tax is deducted, I thought it would be more with the interest being compound. 6.36 gross, 6.55 aer, I would be very grateful if someone could explain this, hopefully as clearly as possible.

Thanks so much

debbie42

It sounds about right to me.

Just on average, for a month, you'd expect around
£10,000 * .063 /12 = £52.5 approx , so around £42 after 20% tax.

YorkshireBoy

Agree the figures look right.

The rate has recently increased though, hasn't it? (from 6.31% gross p.a./6.50% AER to 6.36% gross p.a./6.55% AER). I'm not sure exactly when it changed, but this change makes it harder to accurately calculate your interest.

However, and assuming the £10,088.84 is the August starting balance, your August interest should be...

£10,088.84 x 6.36% / 365 x 31 x 0.8 = £43.60

freddysmith

I agree it seems about the correct interest.
I would work it out by getting the daily interest
(10000 x 0.0655) / 365 to get gross daily interest then muliply by 0.80 to get net of tax. Comes out to approx your figures when multiplied by days in the month

glitterygert

thanks very much guys and gals

YorkshireBoy

freddysmith wrote: »

(10000 x 0.0655) / 365 to get gross daily interest

That won't give you the (accurate) gross daily interest because the 6.55% is the AER, ie after compounding.

Interest isn't compounded until it's been paid at the end of the month (12 months compounding will deliver the 6.55% AER), hence you need to use 0.0636 (ie the gross p.a. rate).

freddysmith

YorkshireBoy wrote: »

That won't give you the (accurate) gross daily interest because the 6.55% is the AER, ie after compounding.

Interest isn't compounded until it's been paid at the end of the month (12 months compounding will deliver the 6.55% AER), hence you need to use 0.0636 (ie the gross p.a. rate).

Yes I agree with your figures. I was just giving an approx method to show the OP figures were roughly what I would have expected by working out an approx daily interest.
I do like to try and work out how they calculate interest to the nearest penny given more time.

imgarom2

Hi folks im a new " oldie " just coming up for 65 years of age . Can someone help me please ? Which would be better £3600 in a ISA or same amount in ICICI 7.12 % fixed for one year , im paying at the moment 20 % tax. Cheers

debbie42

imgarom2 wrote: »

Which would be better £3600 in a ISA or same amount in ICICI 7.12 % fixed for one year , im paying at the moment 20 % tax.

Hi,

It depends on the interest in the ISA. If you pay 20% tax, then the 7.12% rate would net down to an equivalent of 0.8*7.12 = 5.7 (approx). So, if you found an ISA rate paying more than that (not too difficult, at the moment!) , then the interest recevied would be greater.

It's also worth thinking about the longer term benefits of an ISA. Once the money is in it, you don't pay any tax on the interest until you take it out.

Have a look at Kazza's thread for some ISA rates.

exel1966

Without knowing the AER of the ISA that can't be answered properly as you've nothing to compare the 7.12% against.
Ideally though you should be looking for an ISA paying above approx 5.7% which would give you near to 7.12% gross.

Energize

A 6.5% ISA is equivilent to an 8.125% savings account for lower rate taxpayers, so ISA's are almost always better.