Confused About Tax on Savings

Pennimus

I'm trying to work out where to put some money away for a year. This money is "stoozed" so I'll have to withdraw it later, so I don't want to put it in an ISA where I'll lose the years entitlement. Many people have told me that a fixed rate bond is best here.

I'm a higher rate tax payer, so in crunching the figures I'm coming to the conclusion it's not really worth the effort. I used the MSE calculator to work out how much I could make and, minus the balance transfer fee I'll have to pay I barely make a profit.

However, someone here at work is saying banks factor tax into their publicised interest rates. So if they say 7.01% (icesave, for example), that's what you get after tax???

That can't be right, can it? For a start, how would they account for the multitude of different tax rates in different countries?

Lets boil this down to a simple question. Lets say 7.01% of my investment = £100. How much of that interest do I get to keep, and how much goes into the taxman's grubby little hands?

Thanks for your help.

Lokolo

Rate * 0.6 for you.

Means 4.206% <-- thats what rate you will get, however the bank will only take 20% (giving you a rate of 5.608%) off the interest and you need to declare the interest when filling in tax return form so they can take another 20% of it (giving you final of 4.206%).