santander 123 joint a/c interest on balance

seh567

Hi. Not very good with maths so cant work out if my months interest is correct. This is a joint account with myself a non tax payer and my husband a standard tax payer. Could someone tell me how to work out the monthly interest on a balance of approximately £14000. The transaction shows as interest after tax 2.12 deducted. I realised it wont be entirely accurate because the balance has fluctuated between 14k & 15k during the month but as its my first interest payment i would like to have a rough idea. Thanks

Ballard

The calculation for sterling interest is:
(Principal x Interest rate x days)/365 (or 36500 to convert the interest rate to a percentage)

So, for example, 12,000 for two days at 3% would be £1.97.

If you can put it on a spreadsheet it should be fairly straightforward to calculate. I can't help you with the tax aspect though.

I hope that this helps. I should point out that some other currencies work on a 360 day year so you'd divide by 360 rather than 365.

grumbler

14000*((1+3%)^(1/12)-1)*(1-20%/2)=£31

- can vary slightly depending on the number of days.

a&akay

seh567 wrote: »

Hi. Not very good with maths so cant work out if my months interest is correct. This is a joint account with myself a non tax payer and my husband a standard tax payer. Could someone tell me how to work out the monthly interest on a balance of approximately £14000. The transaction shows as interest after tax 2.12 deducted. I realised it wont be entirely accurate because the balance has fluctuated between 14k & 15k during the month but as its my first interest payment i would like to have a rough idea. Thanks

You need to open a 123 in your own name only so you don't as a couple pay any tax. We've got access to 4 in our household, all registered for gross which you can do online once yours is open and showing (you're allowed separate accounts and a joint since the rules changed). You can transfer the joint holding to your sole online once it's showing. You'll still pay the £2 monthly fee on the joint so maybe that's best cancelled once yours is set up.

Archi_Bald

seh567 wrote: »

This is a joint account with myself a non tax payer and my husband a standard tax payer.

Did you tell Santander you are a non-taxpayer? You can do this in your online banking (Change personal details - Change tax status).

Ballard

I've calculated (hopefully I haven't made any mistakes) that to pay £2.12 tax on the interest of £14,000 for a month you'd be receiving interest at 0.92%. With the variations of the balance I'd assume that you're receiving interest at 1%.

enthusiasticsaver

Others have given you the way of calculating the interest on the Santander 123 and on £14000 you should be earning 3% gross so in a normal month that should be £34 approx gross -£3.40 tax (10% for one non tax payer and one BR taxpayer) providing a) you have filled out a tax exemption form for yourself b) this is calculated on a 30 day month on £14000 so if the balance has changed significantly this will differ and c) all other conditions of the Santander 123 account have been met - funded by £500 per month from an external source and 2 active direct debits.

seh567

Hi. Thanks for the replies

Enthusiastic Saver. How did you arrive at 3.40 Tax deduction? Excuse me if I am thick but how do you deduct 20%(standard tax) and 10%(non taxpayer) from 3% interest. Ive also advised Santander I'm a non tax payer via online banking where there is an option to choose.

a&akay. I have also opened an account in my own name holding approx £14k as well. My husband is terminally ill so his £14k is in the joint bank account to save hassle and will be easier for me to handle when the time comes. I know it would make sense to transfer monies from joint to single account with regards to me being a non tax payer but I want him to be able to access monies if anything happened to me as we are both getting on in years.

Grumbler. Does your formula take into account standard and non tax payer?

Thanks all

molerat

On a joint account half of the interest will be taxed at 20% and the other half at 0% giving an effective tax deduction of 10%.

Grumbler. Does your formula take into account standard and non tax payer?

Yes it does - the (1-20%/2) bit

Alter_ego

Santander will treat each of you as owning half the balance if one is a non tax payer.

Snap! Molerat

YorkshireBoy

seh567 wrote: »

Excuse me if I am thick but how do you deduct 20%(standard tax) and 10%(non taxpayer) from 3% interest.

You need to use the gross p.a. rate of 2.96% in your calculation.

Re net from gross, you simply multiply your partner's interest (which is half the total interest) by 0.8, but as said above you may as well multiply by 0.9 on everything.

Perhaps it'll be easier to understand the following method of calculating interest?

Each day you earn gross interest at:

Closing balance x 2.96% / 365

At the end of the statement month you add up all the, say, 31 days of interest.

You then, in your case, multiply the total by 0.9 (which will deduct the aforementioned 10% aggregate tax).

A worked example with a static £14K balance throughout a 31 day statement month on your joint account:

£14,000 x 2.96% / 365 x 31 x 0.9 = £31.68

NB: The above assumes you've submitted an R85 on the joint account.