Yorkshire Bank - Interest Options?

Newbie2saving

Ok so please excuse my niavity here, but is there any difference in these and if so which is best?

Interest options
Interest Capitalised and Paid at Maturity
Interest will be credited to the Account on the Maturity Date (unless you advise us differently) or when the Account is closed, if earlier. Interest will start accruing on the Deposit from the Commencement Date and will be calculated on a daily basis, up to and including the last Business Day before the Maturity Date on the full credit balance which has been Cleared for Use on the Account.
Annually Capitalised InterestInterest will be credited to the Account on each anniversary of the Commencement Date and on the Maturity Date (unless you advise us differently) or when the Account is closed, if earlier. Interest will start accruing on the Deposit from the Commencement Date and will be calculated on a daily basis, up to and including the last Business Day before the anniversary of the Commencement Date, on the full balance which has been Cleared for Use of the Account.

I am looking for the word compounded - is that really what the second one is meaning?!?!?

TIA.

Newbie2saving

Come on you clever lot - I'm half way through an online application and I don't know the difference! :rotfl:

Big thanks.

opinions4u

Capitalise and compound are the same thing.

You want the interest paying when you think your tax liability will be lowest.

If you will remain a basic rate taxpayer forever, I'd suggest capitalising annually as I think the 20% rate will be increased in the next 5 years (if the rate of tax doesn't change it's as broad as it's long). If you think you will become a higher rate taxpayer in the next few years, the same logic applies.

If you think you will be paying a lower rate of tax towards the end of the term, have all interest paid on maturity.

Newbie2saving

Thankls for the great advice re tax implications - much appreciated. Thanks a lot, oponions4u.