Tax on savings interest earned

[anonymous-user]

Hi I'm trying to work out where is best to put my money, can someone clarify this? At the moment I have a cash ISA that started at 3.05% interest, which reduced to 2.4% about a year ago and is now 2%. It was obviously a very good rate for a cash ISA, and is still good compared to other cash ISAs, but I think it might be better to put all the money into my Santander 123 account (3% interest).

However I can't work out what the percentage of tax is that I will pay on the interest earned. I'm not sure if 3% after tax is better than 2% with no tax.

http://moneyfacts.co.uk/guides/savings/how-are-my-...

From that it sounds like I would pay 40% tax on the interest? (I'm in the higher band). Does that effectively make the interest earned on my Santander 123 account 1.8%?

Thanks for any help

[Eric Mc]

Yes. 40% of the interest will be taken by the government.

[anonymous-user]

Thank you, as I thought then. I'll leave the money in the cash ISA.

Cheers

[Shaoxter]

If you don't do a self assessment every year then you could just keep your interest income hush hush... although in any case the interest from Santander will have 20% taken off already (i.e. 2.4% net). But I wouldn't take money out of ISAs unless there was a really big difference in rates.

[Eric Mc]

The banks supply the interest details to HMRC - so keeping interest "hush hush" might not be that clever.