Just turned 18, Gross Interest?

kkid

Just turned 18 and my HSBC account has turned into a normal current account.

I noticed when online banking that there was a tab mentioning "Gross Interest". I didn't have a clue what it was so clicked on it. It mentioned something about confirming that I do not pay tax on my balance.

I earn about £3000 per year and hence as this is below £8000(?) this is all tax free, right?

Therefore do I need to sign this gross interest thingy so that HSBC does not give my money away to the queen?

matttye

Tax is taken off you before you're even paid; your bank doesn't have anything to do with paying tax from your wages.

Gross interest in this instance will be the interest that the bank pays you on your balance. You DO however get taxed on any interest you earn, unless it's an ISA account. Gross interest = interest before tax, NET interest = interest after tax.

For example, the Santander 123 Current Account pays 3% gross interest, which works out at 2.4% after tax for a 20% taxpayer.

If you're not paying tax you probably won't get taxed on your interest either, unless it takes your earnings above the personal allowance.

McKneff

I know that you need to sign an R85 form to say that you are a non taxpayer. Does it mention that number at all.

I believe you would have to go into the bank to do this.

Lokolo

It doesn't matter what age you are, but if you earn over a certain amount you will pay tax.

If you earn only £3000 (including interest) then you are below your personal allowance of £9440 (which you pay tax after) then you can apply for interest to be paid without tax taken off.

http://www.hmrc.gov.uk/forms/r85.pdf

You may be asked to fill in that form.

innovate

HSBC current accounts do not pay any interest, so it doesn't matter whether it's gross or net, or how hold you are.

If you want a current account that pays interest, check out Lloyds, BoS, Nationwide, Santander.

kkid

innovate wrote: »

HSBC current accounts do not pay any interest, so it doesn't matter whether it's gross or net, or how hold you are.

If you want a current account that pays interest, check out Lloyds, BoS, Nationwide, Santander.

oh !!!!!

My old account with them had interest. They never told me it changed with this standard account -_-

I guess I'll be looking for a new current account then...

innovate

what account did/do you have?


Edit: ah, I see, Student Accounts have "Interest paid on credit balances of up to
£1,000 in your 1st year at uni". Sounds like a honey-trap to me.

It's 1.5% above BoE Base Rate - i.e. 2.0% atm. They will have deducted 20% from any interest they paid you because even babies are subject to tax (and personal allowances).

Anyway, the amounts we are talking about are negligable. 2% AER on £1K is £20 a year before tax, and £16 after tax. They aren't paying you anything above the £1K, or after your first year. Pretty much a terrible deal.