How to work out how much interest?

ipri

Hi..I have 115k in N rock.....am I correct in thinking [EMAIL="that...@6%pa..I"]that...at 6%pa..Gross..I[/EMAIL] should recieve £6,900 after 1yr.?..or is this taxed...and at what rate? ta ian

Ps...standard rate tax payer..

Lokolo

20% for standard.
40% for higher.

So you will get £5520.

debbie42

It's taxed at 20%, at source, if you are a standard rate tax payer (and the interest also gets included in your earnings, so may affect your tax band).

ipri

thanks...how does the bank know which rate to apply? ian

Lokolo

I think they just do the normal 20%, and when you fill in tax return form you're meant to specifiy any interest earnt so if you are a higher tax payer you give them some more money.

But other than that - no idea!

RayWolfe

That's correct.

kenshaz

RayWolfe wrote: »

That's correct.

Really Why?

LittleVoice

kenshaz wrote: »

Really Why?

Because the bank doesn't know what tax you should pay so can only deduct tax at 20%.

Of course they can pay without deducting tax if a saver completes the form for gross payment.

The interest does form part of your taxable income and so needs to be declared to HMRC who will collect the tax from you.