Savings Account Interest

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Hi,

Probably a silly question and I've most likely done my maths wrong but thought I would see if someone could explain!

I have a Defined Access E-Saver Issue 2 with Virgin with 1.20% net interest.

As of 22nd February my savings balance was £10,100.00. My interest was paid yesterday as £70.23 then £14.02 deducted for tax. I would of made my interest £121.20 then £24.24 deducted for tax?

Interest and VAT have always been my downfall and I would appreciate any help please :)

Thank you

Comments

  • Flobberchops
    Flobberchops Posts: 1,279 Forumite
    First Post Combo Breaker First Anniversary
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    Is interest paid monthly or annually?
    Is the 1.2% APR or AER?
    Was your balance £10,100 for the whole period or have you added to it since you last received interest?
    : )
  • LegalCashier
    Options
    Is interest paid monthly or annually?
    Is the 1.2% APR or AER?
    Was your balance £10,100 for the whole period or have you added to it since you last received interest?

    Thank you for response -
    Annually
    It says 1.50% gross, 1.20% net and 1.51% AER
    I opened the account last August with the following deposits:

    11/03/2016TAX DEDUCTED - £14.04
    11/03/2016INTEREST EARNED + £70.23
    22/02/2016Payment + £450.00
    20/01/2016Payment + £650.00
    29/12/2015Payment + £1,550.00
    12/10/2015Payment + £450.00
    22/09/2015Payment + £900.00
    26/08/2015Payment + £1,000.00
    05/08/2015Payment + £1,000.00
    05/08/2015Payment + £4,000.00
    04/08/2015Payment + £100.00
  • eskbanker
    eskbanker Posts: 31,495 Forumite
    First Anniversary Name Dropper Photogenic First Post
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    As with any other interest-bearing account, interest is earned on the basis of what the balance is each day, i.e. you'll only get interest on £10,100 for the days on which that was the balance, not for the entire period, which in itself is less than a year anyway.

    Without plugging it all into a spreadsheet, the average balance over that period of seven months looks like roughly £8K so the gross interest should be approximately £8K * 1.5% * 7/12 which is indeed the £70 you refer to pre-tax, so that sounds right to me....
  • mathsmaster
    Options
    The calculation by Virgin is correct. You might have £10,100 in the account now but for most of the year you had far below that amount. Interest is calculated daily and paid at the end of the year - your question implies that you think it is calculated on the final day of the year and then added, which it is not.
    "You're never beaten until you admit it."
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Name Dropper First Post First Anniversary
    edited 12 March 2016 at 3:55PM
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    You earn interest each day at...

    closing balance x 1.51% / 365

    So your first calc is...

    £100 x 1.51% / 365 x 1 (1 day interest for 4th August)

    The second one is...

    £5,100 x 1.51% / 365 x 21 (21 days...5th - 25th August)

    And so on

    Add up all 8 interest figures for gross
    Multiply this by 0.2 for your tax
    And the first less the second is your net interest
  • LegalCashier
    Options
    Thank you all it makes sense now!
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