Tax on savings

greyster

Hi all

I'm aware of A&L offering 10% interest on one of their savings accounts... Yet when I read the press release it says on £3000 you would earn about £150. What are the sums here? I'm aware you are taxed on your interest but how much?

Thanks in advance.

ReportInvestor

20% for a basic rate taxpayer.

40% for a higher rate taxpayer.

greyster

so why £150? £180 at 40% i calculate.

ReportInvestor

I guess it's a regular monthly saver so that you would only have £3K invested by the end of the year (average would be just over £1.5K).

That would explain the phrase "about" £150. And in that case the £150 would be gross, before tax.

greyster

ahhhhh that makes sense

Is this deal better than mosts ISAs then?

ReportInvestor

Yes, but especially if you make sure you get a decent rate of interest (in another non-ISA account) on the £3K while it is waiting to be invested monthly into the ISA.

greyster

sorry i don't understand, can you reiterate?

ReportInvestor

If you stick £3K in a bank account paying 0.1% interest so that it can be gradually transferred to the A&L ISA then you undermine the value of 10% interest on the ISA.

greyster

I think the A&L current account (which you have to have in order to get the 10% account) is 5% anyway. So I guess thats a lot of extra interest.

grumbler

There is an article here on this subject: Regularly Beat the Best Savings Accounts.
And a duscussion where all this questions were discussed many times ...

In fact you will earn about £162.50 gross, not £150 ...