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

Archi_Bald

anonymon wrote: »

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

Have you maxed all the other interest paying current accounts? They take a total of some £50K-odd between them. And what about Regular Savers?

enthusiasticsaver

As already said on this thread you earn 3% up to £20000 and nothing above that. We have two Santander 123 accounts, one of which just keeps £20000 in it all the time and enough to cover the direct debits set up on it ( water, phone and sky) to earn cashback. I transfer everything above that, my wages when they come in and interest to our other Santander 123 account which has my husbands wages go in and the other direct debits - council tax, gas, electric etc. That way we are earning 3% on everything. I have an alert set up on my sole Santander 123 to let me know when there is any more than £20k in it.

JimmyTheWig

Archi_Bald wrote: »

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.

3% AER is exactly what you _do_ get.
What you are saying is that nobody can make 3% of £20,000 (=£600) in one year on that account.

anonymon

So my savings account is actually with NS&I as it happens, I just checked on the phone and like you say the BR tax is not automatically deducted.

Archi_Bald wrote: »

Have you maxed all the other interest paying current accounts? They take a total of some £50K-odd between them. And what about Regular Savers?

I have not, I looked into my options but decided to keep things as simple as possible for now. I realise I could get a better rate but I'm time limited at the moment, and if I'm honest really hate dealing with banks!

To give some context, when I started I had £103k split between a Cooperative business account paying almost no interest and a Smile account paying no interest at all. I had almost £20k at risk not covered by FSCS, I was earning basically no interest, I had no monthly budget or savings plan and I didn't even have a vague plan for the next few years. I knew I should do something but I had been putting off learning about investments, savings, bank accounts etc for ages.

After a whole bunch of research and reading I realised how stupid my situation was. Since then my aim has been to sort things out so that I'm saving a regular amount each month, get fully covered by the FSCS and to at least get some interest. My plan is as follows:

- [x] Open a NS&I cash ISA for £15k at 1.5% tax free
- [x] Open a NS&I savings account where I can safely put any excess money at 1.1%
- [ ] Switch my Smile current account to the 123 Santander account and keep the balance close to £20k for the 2.96% interest.
- [ ] Possibly switch my business account to a bank that charges less fees / offers better online banking.
- [ ] Set up a standing order from my business account to pay my personal account my budgeted money for the month. Set up another one to pay what's left into my savings account.
- [ ] Keep transferring the allowance into my ISA each year.
- [ ] Re-evaluate my accounts / situation once a year.

In two years time when I'll have an idea about what me and my partner want to do I'll be able to plan the next step. I might put money down on a house, start investing some of my funds or continue to save.

Archi_Bald

enthusiasticsaver wrote: »

As already said on this thread you earn 3% up to £20000 and nothing above that. .

you do not earn 3% if you always have at least £20K in the account.

JimmyTheWig wrote: »

3% AER is exactly what you _do_ get.
What you are saying is that nobody can make 3% of £20,000 (=£600) in one year on that account.

What I am saying is that nobody who always has £20K in the account can make any more than 2.96% as AER includes compounding and you cannot get any compounding if when you have £20K in the account always.

On £20K, you get a maximum of £473.60, or £592 if you are a non-tax payer.

Archi_Bald

anonymon wrote: »

I have not, I looked into my options but decided to keep things as simple as possible for now. I realise I could get a better rate but I'm time limited at the moment, and if I'm honest really hate dealing with banks!

Clearly it is your decision what you do with your money but it pains me to see people coming on MSE and then settle for low interest rates, thereby depriving themselves of hundreds of pounds.

anonymon

Sorry to cause you pain Archi Bald! At least I was aware of my options thanks to you guys and I did do the maths before deciding anything.

a&akay

Archi_Bald wrote: »

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.

This account allows online registration for gross which is why I like it on my 3 accounts where I qualify.
Click on the account in question
My Details & Settings
Change Personal Details
Change Tax Status

neilsolaris

Archi_Bald wrote: »

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.

Santander apparently don't have R85 forms. You just need to notify them instead.