Gross Interest added when I changed account - confused what it is? 30 September 2007 at 4:36PM in Savings & investments 4 replies 646 views

tomprice

Hi there,
I'll try and give some background info before i launch in to it all!

Up until last week i had:
Mini Cash ISA (Britannia) with around 6k in and this year's allowance all in.
First Saver (ends at age 23) which had about 7.5k in.

I turned 23 so had to change my First Saver account.

I decided therefore to switch my First Saver to a Direct Saver (Same account really, same interest ish, just operated over phone and internet instead of in branch).

I also decided to stick my Mini Cash ISA into a Fixed Rate Cash ISA at 6.55% fixed for a year whilst i was in there - was a good deal.



Anyway.
My First Saver account was changed over all fine. But i was just looking through the passbook they gave me back to keep hold of, it said Gross Interest £307 and then obviously the full amount transfered out. I did not notice at the time so I never asked.


So my question is why did i get the Gross Interest? I've already got my interest from January. Is this just so it knows how much to carry over to the new account? If so, why does it say Gross? I'm concerned i'll get some deducted as tax or something in the future year!? Also i presume this means in January i'll just get the remainder of the interest?



Also one last question.
I had 6k in my Mini Cash ISA at 5.5%. (This year's allowance full up).
I've moved to fix rate of 6.55%.
In April, i can open a new Mini Cash ISA and put in my new year's allowance. Then when my fixed rate matures in November, i can just add it to my Mini Cash ISA - this is correct i think?

Anyway. My questions are..

With it being fixed, i get interest of Maturity, not in April.

I was wondering my normal ISA would get interest on the 6k in April, say of £200, then would be earning money at 5.5% on £6200.

I'm concerned that because i won't get April interest added to the fix rate, i'm potentially losing out?


Hope that makes sense.

Thanks
Tom.

LittleVoice

I don't know enough about the rules relating to your particular ISA products to answer questions about when interest will be paid, etc.

So regarding the gross interest payment on the closure of the savings account - assuming there was no mention of tax deducted to give a nett amount on a separate line then I would guess that you were registered as a non-tax payer for that account and therefore they have not deducted tax.

Though in your mind you were simply transferring the money, the bank will see this as a closure of one account and the opening of another. So interest on the account being closed will be paid from the time of the last interest payment up to the time of closure and then added to the capital ready for moving to the new account.

tomprice

Thanks for that - guess it makes sense.



Anyone any idea on the ISA questions?

Thanks.

CLAPTON

you need to check the paper work but when you transferred your ISA they probably closed the old one and added the interest that had accrued at that time and moved it to the new ISA... so you could argue you are already earning interest on the interest.

tomprice

Thanks.

When i transferred they never actually did anything. Only rang up the head office to change it and put a sticker on my passbook saying fixed rate.

The lady did say something about being better off but i presumed they always say that anyway!?