Interest On Savings, whats happening?

amibeingrippedoff_2

I have an issue with my interest on my saving the bank apply to my account each month!

My situation is i have £60,000 in an account which has a gross interest rate of 5.6% applied to the account. would i be right in saying that over the year i should have

£60,000 x 1.056 = £63,360 in my account?

If i were to divide the extra £3,360 by 12 months i should have on average give or take a few £ here and there £280 applied to my account every month???????

Anyway, going by the last few months i have had on average £220 - £222 applied to my account. IS THIS RIGHT or is the bank not applying the correct amount to my savings account? I have not made any withdrawals or plan to from my account but it certainly doesnt look like i will get the 5.6% thay say i am getting.


maybe i am missing something here, can someone please advise me where my calculations may be wrong?

thank you

Steve_xx

The bank will apply the interest as you say, but they will then deduct 20% tax from the interest. Therefore the nett monthly amount credited to your account would be about £224.

If you moved the money to say ICICI Bank, paying 6.41%, then after tax you would be credited with about £256 each month.

Thomas_Crown

amibeingrippedoff wrote: »

I have an issue with my interest on my saving the bank apply to my account each month!

My situation is i have £60,000 in an account which has a gross interest rate of 5.6% applied to the account. would i be right in saying that over the year i should have

£60,000 x 1.056 = £63,360 in my account?

Anyway, going by the last few months i have had on average £220 - £222 applied to my account. IS THIS RIGHT or is the bank not applying the correct amount to my savings account? I have not made any withdrawals or plan to from my account but it certainly doesnt look like i will get the 5.6% thay say i am getting.


maybe i am missing something here, can someone please advise me where my calculations may be wrong?

£280 per month gross interest less 20% savings tax = £224 pm nett.;)

Thomas_Crown

Memo to self:- Must type faster.

YorkshireBoy

Is the 5.6% the 'AER' or the 'gross p.a.' rate?

On a monthly interest account, the interest credited each month is...

Open balance x gross p.a. rate / 365 x n x 0.8

where n = number of days in the month, and 0.8 is the tax adjustment.

The open balance + interest then becomes the open balance for the following month's calculation.

PasturesNew

Memo to rest of us: must declare ourselves independent nations so there IS no tax on savings

amibeingrippedoff_2

thanks for clearing this up for me, i now see why.

just another quick question on this.

I am living in Australia at the moment and have been for the last 7 months is there any way that i can claim this back as i am not resident there at the moment?

Steve_xx wrote: »

The bank will apply the interest as you say, but they will then deduct 20% tax from the interest. Therefore the nett monthly amount credited to your account would be about £224.

If you moved the money to say ICICI Bank, paying 6.41%, then after tax you would be credited with about £256 each month.

jimbow25

If you don't earn enough to need to pay any interest on savings then you'd need to fill in a Form R85 to stop any more deductions, which I think goes to HMRC, though it might get sent to the bank.

I'm not sure if this is also the correct method for people who live abroad, someone else may be able to advise on that.

Once that's in place you should be able to write to them and get the money back.

Steve_xx

amibeingrippedoff wrote: »

thanks for clearing this up for me, i now see why.

just another quick question on this.

I am living in Australia at the moment and have been for the last 7 months is there any way that i can claim this back as i am not resident there at the moment?

Tricky one. I'm not 100% sure, but I know that it will depend on where your residential status is. If you are regarding yourself as a UK citizen then you must pay tax to the UK government. But if you are effectively emigrating then you would probably be liable to the Australian government. You would be best advised to ask at HMRC for advice about this if you thought it was worth it.

YorkshireBoy

jimbow25 wrote: »

I'm not sure if this is also the correct method for people who live abroad, someone else may be able to advise on that.

This may help:

http://www.hmrc.gov.uk/pensioners/taxwhenleaving.htm

Scroll half way down to "Tax on UK bank and building society interest" and check out forms R105 and R43.

amibeingrippedoff_2

Thanks guy`s for everything!!!!!!!!!!!!!!!