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# Savings Account Interest

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Posts: 42 Forumite
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

• Posts: 1,279 Forumite
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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?
: )
• Posts: 42 Forumite
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
• Posts: 31,495 Forumite
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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....
• Posts: 56 Forumite
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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."
• Posts: 31,541 Forumite
edited 12 March 2016 at 3:55PM
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You earn interest each day at...

closing balance x 1.51% / 365

£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
• Posts: 42 Forumite
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Thank you all it makes sense now!
This discussion has been closed.

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