Santander 123, savings a/c only

logie48

Might be worth noting that I have not received any interest on my HBOS account either.

logie48

Is it only interest that is taxed, or is it the amount sitting in the account? Surely not the later?

Eco_Miser

The 20% tax is on the interest, reducing it from 3% gross to 2.4% nett. You wouldn't see a tax deduction on your HBOS account, only a lower interest payment (if any).

Bromley86

Ah, perhaps you've paid not tax because they've not paid you any interest? Certainly tax and fees are entirely separate.

It doesn't work quite as you think. Here's the example with 3% (call it 0.25% per month, i.e. 3% divided by 12 months (not quite accurate, but close enough)) and a balance of £3,000 sitting there for the whole month:

Gross Interest: £3,000 * 0.25% = £7.50
Tax: 20% * £7.50 = £1.50
Net interest = £7.50 - £1.50 = £6.00

So after 1 month you'd have £3,006, give or take. After a year, the £3,090 that you'd expect to have (£3,000 * 1.03) would actually only be £3,072 (i.e. less the £18 in tax, being 20% of £90).

EDIT: I see you weren't paid interest, which explains the no tax thing. And it is only the interest that is taxed. For now. (No, seriously, just kidding there).

bsms1147

It's only the interest that is taxed.

Say you have £10000 in a 3% account, over the year you'll get 3% interest, which is £300. This will then be taxed at 20% (20% of £300 being £60) and so you will actually receive £240. Therefore overall your effective interest rate on the account is 2.4%.

logie48

Bromley86 wrote: »

Ah, perhaps you've paid not tax because they've not paid you any interest? Certainly tax and fees are entirely separate.

It doesn't work quite as you think. Here's the example with 3% (call it 0.25% per month, i.e. 3% divided by 12 months (not quite accurate, but close enough)) and a balance of £3,000 sitting there for the whole month:

Gross Interest: £3,000 * 0.25% = £7.50
Tax: 20% * £7.50 = £1.50
Net interest = £7.50 - £1.50 = £6.00

So after 1 month you'd have £3,006, give or take. After a year, the £3,090 that you'd expect to have (£3,000 * 1.03) would actually only be £3,072 (i.e. less the £18 in tax, being 20% of £90).

EDIT: I see you weren't paid interest, which explains the no tax thing. And it is only the interest that is taxed. For now. (No, seriously, just kidding there).

I see now. So what I should be looking to do now is ditch the BOS account for one that pays interest?

My account sits well in credit each month, so i'd probably reap the benefit of having an account which pays interest.

innovate

Use the Santander 123 calculator to see whether it's worth your while.

badger09

logie48 wrote: »

I see now. So what I should be looking to do now is ditch the BOS account for one that pays interest?

My account sits well in credit each month, so i'd probably reap the benefit of having an account which pays interest.

If you're going to switch your account completely over to Santander, why not use their switching service? There have been some very positive comments on here.

logie48

badger09 wrote: »

If you're going to switch your account completely over to Santander, why not use their switching service? There have been some very positive comments on here.

Yeah, I had a look at that. Would cut out some of the hassle. :cool: