Charity Bank article discussion area

Former_MSE_Dan

This discussion relates to the Earn over 10% a year in a savings account article and Money Muttering.

Click reply to discuss.

Reaper

During year 5 I see you are able to take out 50% of the investment. How does this affect the tax relief? Is it enough to just make it into a new tax year and then take half the cash, or do you have to keep the money there for the full tax year to qualify?

If you can take it out that makes the final year interest even better as you can shift a chunk to another account and earn more interest on it!

Reaper

Paul_Varjak wrote:

2. The application form gives no option to keep the 2% interest!

Yes it does. Make sure you fill in the right form though. The Street Smart version donates the 2% to the charity. Here is the one you want which does give you the option.

5. Bank has only been registered with FSA for two years!

There was a previous incarnation of the bank called "Investors in Society" which ran for 6 years.

6. What if the government changes the conditions on these accounts?

7. What if the Charity Bank loses it status to operate these accounts?

See their FAQ which answers these questions.

isasmurf

Reaper wrote:

During year 5 I see you are able to take out 50% of the investment. How does this affect the tax relief? Is it enough to just make it into a new tax year and then take half the cash, or do you have to keep the money there for the full tax year to qualify?

If you can take it out that makes the final year interest even better as you can shift a chunk to another account and earn more interest on it!

Ah, it looks like the Inland Revenue have already thought of this one!

The amount of tax relief available for any given year is calculated on the average on the savings (or loan as the IR call it) over an appropriate period. The average is calculated on a daily basis and is known as the 'Average Capital Balance'.

In years 3, 4 and 5 the amount of tax relief is based on
The smaller of:
– Average Capital Balance for year
that commences on the
anniversary of the investment
date that falls in that tax year or
accounting period, and
– Average Capital Balance for the
period of six months that end on
the second anniversary of the
loan

(This is taken from the IR CITR Guidance notes)

Reaper

Reaper wrote:

During year 5 I see you are able to take out 50% of the investment. How does this affect the tax relief? Is it enough to just make it into a new tax year and then take half the cash, or do you have to keep the money there for the full tax year to qualify?

I think I have found the answer to my own question - this won't work, if I have understood the IR rules correctly.

If anyone else is looking for the IR guidence notes which are mentioned by the Charity Bank but not linked to you can find them here.

EDIT: Thanks isasmurf, you beat me to it.

isasmurf

Paul_Varjak wrote:

The only application form for the CITR account gives no option for you to receive any of the 2% interest!

Now, now boys (and girls?) play nice.

This one asks you how much interest you want to receive and which account you want it paid to (Page 3).

deemy2004

2% ?

Getting 2.7% with tridos.co.uk

ED

Anyone here know if the 5% Tax Relief against Income Tax applies just as much for a person without a job but whose building society accounts automatically have a substantial collective sum of tax @ 20% deducted annually?

A family member's only income is from bdg society savings + a taxable Benefit, and the CITRA account could be helpful in getting back more of the tax than usual, + charities are helped.

kevtrader

I'm assuming you can't add to the account once you paid in the deposit. Is that right?

If so then when was the last time this kind of thing happened as I don't have enough money to spare?

Thanks

ED

kevtrader, here is the reply my family received today from Charity Bank :

"You cannot add to a CITRA as it is a fixed 5 year deposit but you can open further accounts with a minimum of £1000 in each. We would expect a cheque to be sent with the application as it forms part of our ID procedure."

nitejar

I've read the article and the discussion and I get the idea of the charity account.

I'm a basic rate tax payer so could get the tax relief, but if I put £1000 or more in the account, I probably wouldn't use all my £3000 mini cash ISA allowance in 2005/6.

So I actually need to compare with the best ISA rates. The Abbey postal seems best at 5.35%, no fee to transfer [A&L £25] or short term fix [Firstdirect] and interest rates may drift up over the next 5 years.

If I take the 8.25% qoted as the effective rate for a basic rate tax payer, less 20% to allow for the tax a basic rate rax payer would pay, but I wouldn't if I used the ISA, I get an answer of an effective rate of 6.6%, which compares well with my ISA.

Have I worked this out right?