What happens with 123 account if I go over £20k

anonymon

Quick question, supposing I have a Santandar 123 account set up, I'm earning my 3% interest on my £20k. Then I somehow mess up my standing orders and my account balance becomes £20,001. What happens?

- Do I receive 3% interest of £20,000 and 0% on £1 for that month?
- Do I receive 0% interest on £20,001 for that month?
- None of the above?

Cheers!

badger09

anonymon wrote: »

Quick question, supposing I have a Santandar 123 account set up, I'm earning my 3% interest on my £20k. Then I somehow mess up my standing orders and my account balance becomes £20,001. What happens?

- Do I receive 3% interest of £20,000 and 0% on £1 for that month?
- Do I receive 0% interest on £20,001 for that month?
- None of the above?

Cheers!

This
3% interest of £20,000 and 0% on £1 for that month

Alter_ego

Mine is always above 20k. I use it day to day. Just no interest on the excess.20k is not a maximum. You first option is correct

Archi_Bald

None of the above.

You receive one month's worth of interest after BR tax for your £20,000 and nothing on any balance above £20,000.

The interest is calculated based on the gross rate, 2.96%. The month is your statement month.

E.g. in a 30-day month, the calculation is:

((20000*2.96%)/365*30)*0.8 = £38.93

anonymon

What's BR tax Arci bald? It sounds like I need to go read up on that!

Thanks for clarifying what happens should I clear the the £20k cap everyone

Archi_Bald

badger09 wrote: »

This
3% interest of £20,000 and 0% on £1 for that month

Alter_ego wrote: »

You first option is correct

Nobody can make 3% AER in a 123 if the account always has £20K as there is no compounding. The monthly interest is always calculated using the gross rate.

Archi_Bald

anonymon wrote: »

What's BR tax Arci bald? It sounds like I need to go read up on that!

20% basic rate tax, which will automatically be withheld at source. If you qualify for gross interest, you need to give Santander an R85.

If you are a higher or additional rate tax payer, you need to tell the HMRC about the interest you earned.

anonymon

Ah I see, hmm that raises another question... I'm self employed. (I had assumed that income tax wasn't taken off interest automatically and instead I just declared how much interest I earned in my tax return. I've just opened a savings account as well, is there something I need to do with that account as well?)

YorkshireBoy

anonymon wrote: »

I've just opened a savings account as well, is there something I need to do with that account as well?)

Yes. You need to read the account T&Cs...for both accounts!

anonymon

Balls, another thing for my todo list I suppose!

Archi_Bald

The only accounts that don't take of interest automatically are ISAs and one or two of the NS&I accounts. But their interest rates are rubbish so not worth considering.

As you will have to do self assessments, you will have to declare your savings interest (except if is ISA interest). If you are assessed as a BR taxpayer, you won't have to pay any additional tax on the interest. If you are in the higher brackets, they will take some more tax off you. OTH, if your taxable income is really low, you might get the tax paid on the interest back.