interest calculation

G_M

Any mathmeticians....?

£20,000 at 3% (in a 123 account).
Basic rate tax payer.
Monthly interest payment = £40 pm ?

(ignoring any extra 123 payments and the £2 fee)

20000 * 3% = 600 / 12 = 50 pm gross
50 * 20% = 10 pm tax
So £40 pm net

Yes?

kidmugsy

G_M wrote: »

£20,000 at 3% (in a 123 account).
Basic rate tax payer.
(ignoring any extra 123 payments and the £2 fee)
20000 * 3% = 600 / 12 = 50 pm gross
50 * 20% = 10 pm tax
So £40 pm net

Yes?

Near enough: £40 p.m. net.

If you'd like some spurious precision, your monthly £50 would be nearer £49.33 but so what.

Hominu

kidmugsy wrote: »

If you'd like some spurious precision, your monthly £50 would be nearer £49.33 but so what.

Don't Santander pay interest daily rather than monthly?

So some months it'll be in excess of £50, and some months it could be as low as £46. So between £36 and £40 net.

But whose counting

YorkshireBoy

Hominu wrote: »

Don't Santander pay interest daily rather than monthly?

Interest is always calculated daily, but I'm not aware of any account that actually pays this interest daily?

OP, you're using 3% when you should be using 2.96%, as you always earn interest at the quoted gross p.a. rate (for annual interest paying accounts it makes no difference as the AER and gross p.a. rates are the same, but for monthly interest paying accounts they differ).

So, the way your interest is calculated on this account (with a static £20K balance) is:

Balance x 2.96% / 365 x n x 0.8

where n = number of days in the statement period, and 0.8 is the tax multiplier

G_M

cheers folks!

Knew there'd be some finer detail, but this is good enough.

Just setting up a standing order to move the monthly interest out, but if the balance hovers marginally above below the 20K mark I'm happy!