Kaupthing don't deduct tax?

funkyhitman

Hi I used to have an alliance and leicester web savings account that automatically deducted tax when interest was added every year.

I have recently opened a Kaupthing edge account and have just been paid my first interest amount which is monthly but no tax has been deducted. Please correct me if I'm wrong but don't all savings accounts usually deduct tax?

Thanks.

Mikeyorks

Gross Interest is normally only paid as a standard if you have £50k or more in the account?

Otherwise their normal T&Cs apply :-

16.1.3 Interest Taxation

[FONT=Arial,Arial]Net Interest will be paid unless you have registered as a non-taxpayer by properly completing and sending us the appropriate HM Revenue & Customs form, currently R85, which we will send to you on request. However, [/FONT]
[FONT=Arial,Arial]we reserve the right to pay you Net Interest, even if you have registered as a non-taxpayer. [/FONT]

....... so they should have deducted 20% from the gross - unless you do have £50k+ in there?

Mickey_Monk

They normally do deduct tax at source however this has happened to another forum member too.

We had a discussion about it over at stoozing.com

The_Fiddler_2

Mikeyorks wrote: »

Gross Interest is normally only paid as a standard if you have £50k or more in the account?

....... so they should have deducted 20% from the gross - unless you do have £50k+ in there?

Where do you get the idea that gross interest is paid on £50K+ ?

Baldur

The_Fiddler wrote: »

Where do you get the idea that gross interest is paid on £50K+ ?

From their Terms & Conditions (page 23, para 22.1.3 "Interest Taxation").

roddydogs

so how do you pay the tax? or do you just keep quiet and hope nobody notices?

BruceyBonus

roddydogs wrote: »

so how do you pay the tax? or do you just keep quiet and hope nobody notices?

You would have to complete a Tax Return (or if it is a small amount due, HMRC may accept a letter then will deduct tax from next year's PAYE code).

LongTermLurker

BruceyBonus wrote: »

You would have to complete a Tax Return (or if it is a small amount due, HMRC may accept a letter then will deduct tax from next year's PAYE code).

If you fill out a tax return and state it as "savings income" as opposed to "earned income", doesn't the tax office assume that 20% tax has already been deducted at source? Or is there a tick box to confirm if that's so?

I'm a tax return virgin but suspect that will change this year.

BruceyBonus

LongTermLurker wrote: »

If you fill out a tax return and state it as "savings income" as opposed to "earned income", doesn't the tax office assume that 20% tax has already been deducted at source? Or is there a tick box to confirm if that's so?

I'm a tax return virgin but suspect that will change this year.

I don't do a tax return myself, but on the form it has two boxes for interest:
1. UK bank, building society, unit trust, etc. interest/amount which has been taxed already – the net amount after tax
2. Untaxed UK interest etc. (amounts that have not been taxed at all) – the total amount

roddydogs

wont a lot of people be ignorant of this and assume that tax has been deducted already? what then. surely if u leave it you will get extra interest on the higher amount?

funkyhitman

This is all very interesting. I have £1300 in the account so far and have received 7 days worth of interest untaxed at £1.76. I should have received £1.41 taxed at 20%. I thought I best sort this out now before it escalates because as roddydogs says above, won't I be earning more interest on top of the untaxed interest? I guess I should contact Kaupthing.

Thanks for the help guys!

EDIT: I have also noticed that the interest has been calculated using 6.5% AER...isn't the monthly rate 6.3% and the interest should be compounded each month to give me the AER at the end of the year? If I am given 6.5% every month won't the AER be higher than it is meant to be? I'm a bit baffled by this.