Tesco new 1.35% rate (including bonus) Internet saver
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Unless you need to actually spend the interest each month, there is really no logical argument for settling for a lower AER simply because interest is paid monthly.0
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Is monthly interest a lower AER? I know the difference is probably because of the effects of not having compound interest (ie interest on your interest because you withdraw it every month) but not sure if that's correct.0
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Is monthly interest a lower AER? I know the difference is probably because of the effects of not having compound interest (ie interest on your interest because you withdraw it every month) but not sure if that's correct.
See https://www.moneysavingexpert.com/banking/interest-rates#AER....0 -
Thanks that helps - so the bottom line is that it doesn't matter if you choose monthly or annual rate from a gain point of view. you just miss out on the interest on your interest (because you have withdrawn and spent it).0
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A lot of confused bunnies here.
The comments on AER are hilarious. Contradicting oneself in the same paragraph. Tis the season so I won't quote them to give you a chance to edit to save face.
TLDR version is go with monthly unless you want to influence the tax year as explained.0 -
yes some people do find other people's confusion funny - I personally have never got much pleasure at laughing at other people's mistakes i usually try to help0
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yes some people do find other people's confusion funny - I personally have never got much pleasure at laughing at other people's mistakes i usually try to help
It was not your confusion I found funny. You are the only one in recent exchanges without egg on your face. hoc and Malchester speak the truth and others are now trying to dig out finding caveats and weaseling out on semantics. It was the righteous one confusing you with contradictory comments which you exposed I found funny. We go from "why would you pick lower AER" to "monthly AER is lower but it works out the same if you don't withdraw".0 -
No that's fine wasn't really trying to get at you I was just a bit confused with all the different posts
I had always assumed that if an account for example paid 1.5% annually and 1.45 monthly that even though it appeared to be a lower rate the rates were in fact exactly the same it's just that you weren't getting interest on interest
By the way just in case anybody doesn't know - for fixed term bonds the interest is taxed in the year that it becomes spendable so a five year bond for example even if the interest is shown on the statements each year the tax treatment is that it doesn't get taxed until year five because that's the only time you can access it
unless of course you are allowed to access it but pay a penalty (eg ns&i bond) in which case that does count as accessable and so you should declare the tax each year
Confusing or what!0 -
No that's fine wasn't really trying to get at you I was just a bit confused with all the different posts
I had always assumed that if an account for example paid 1.5% annually and 1.45 monthly that even though it appeared to be a lower rate the rates were in fact exactly the same it's just that you weren't getting interest on interest
By the way just in case anybody doesn't know - for fixed term bonds the interest is taxed in the year that it becomes spendable so a five year bond for example even if the interest is shown on the statements each year the tax treatment is that it doesn't get taxed until year five because that's the only time you can access it
unless of course you are allowed to access it but pay a penalty (eg ns&i bond) in which case that does count as accessable and so you should declare the tax each year
Confusing or what!
The part I've highlighted isn't correct.
There is nothing in tax law about interest received becoming "spendable".
Tax is due in the tax year that the interest is added to your account irrespective of whether or not you can withdraw it.
So, to use your example, for a five year bond the interest gets taxed in each tax year in which it was added to your account, even though you can't get your hands on the capital or the interest until the end of the term.0 -
Ok I am more than happy to be corrected but this is not what articles like this say
https://www.google.co.uk/amp/www.telegraph.co.uk/money/ask-a-money-expert/when-does-the-interest-on-my-fixed-rate-bond-contribute-to-my-pe/amp/0
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