Maths Help

Belly

Belly

Belly

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My mind’s a blank. I’m trying to calculate what the gross figure would be if I get a net return of 5.03% at 20%.

I found a web site calculator which shows 6.29. I accept that but I’d like to know the formula. I’d incorrectly thought it was 5.03/100 x 120 which doesn’t work

Some help please. TIA
 
I don't think so.

If I were to get 5.03% net after being taxed at 20% what would the gross figure have been.

I'm looking at ISA figures for the next financial year, one building society which I already have an account with is offering 5.03% and I'd like to know (and calculate) what the gross figure is.

I do know that if I add 20% to 100 (120) it is NOT the same as taking 20% away from 120 (96). Sorry I've got my numpty head on today.
 
Belly said:
My mind’s a blank. I’m trying to calculate what the gross figure would be if I get a net return of 5.03% at 20%.

I found a web site calculator which shows 6.29. I accept that but I’d like to know the formula. I’d incorrectly thought it was 5.03/100 x 120 which doesn’t work

Some help please. TIA
Click to expand...

Take 100,000 as a bas figure

5.03% would be £5030

Multiple £5030 by 1.2 to get 6036. Which would be 6.036%

That's how i'd have worked it, but seems that's what you were doing.
 
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Given an ISA would be tax free, I'm not sure you're working out what you think you're trying to work to be honest.

Probably easier if you link the account you're looking at and phrase the question differently.

If an ISA is advertising the AER at 5.03%, the annual gross is probably 5.03% as well.

(The calculation you're doing in the OP would be 5.03/80 * 100 rather than 5.03/100 * 120 because you're assuming you're starting with 80% and trying to get back to 100% but I don't think this calculation is relevant to what you're looking at if you're talking about tax free ISAs)
 
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Kenai said:
Given an ISA would be tax free, I'm not sure you're working out what you think you're trying to work to be honest.

Probably easier if you link the account you're looking at and phrase the question differently.

If an ISA is advertising the AER at 5.03%, the annual gross is probably 5.03% as well.
Click to expand...

I agree with this. An ISA would be tax free so you'll have an additional 5.03% on top of your initial investment.
 
mattyfez said:
How much money is in the ISA?

ISAs are tax free... That's kind of the whole point of them?
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Yes thanks I realise that ISAs are tax free, but.....

If I were to put £100 in an ISA at 5% I might be better putting the £100 in a taxed account at 7% (5.6% net).

I'm trying to work out what the gross figure would be of the ISA at 5.03%, which an online calculator says is 6.29% (6.29% minus 20% = 5.032). I have the answer for this but I'm trying to memorise the formula.
 
Belly said:
Yes thanks I realise that ISAs are tax free, but.....

If I were to put £100 in an ISA at 5% I might be better putting the £100 in a taxed account at 7% (5.6% net).

I'm trying to work out what the gross figure would be of the ISA at 5.03%, which an online calculator says is 6.29% (6.29% minus 20% = 5.032). I have the answer for this but I'm trying to memorise the formula.
Click to expand...

I think 5.03/80 * 100 is the formula that you want to work in that direction then.

Bear in mind, you may have other allowances that mean you don't get taxed on all your interest earnings, make sure you've checked what you're entitled to and how much difference that might make.
 
Kenai said:
I think 5.03/80 * 100 is the formula that you want to work in that direction then.

Bear in mind, you may have other allowances that mean you don't get taxed on all your interest earnings, make sure you've checked what you're entitled to and how much difference that might make.
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Yes, thanks that's the formula. The interest on my taxable accounts this year is £8282.00. I realise I will have to pay HMRC 20% tax on £7282.00. I have more of less the same amount in ISAs as Taxable accounts. All taxable accounts are in joint names so my wife is in the same boat. HMRC keep a list, which can only be obtained by phoning them, of the untaxed interest paid to them by banks and building societies. I keep a list of the untaxed interest paid from the 6 taxable accounts. The HMRC list shows actuals and estimated figures and should only use the actual figures to calculate tax owed. In my case after phoning them of the 18 entries only 7 were actual the other 11 estimates. I eventually sorted mine out. In the case of my wife they actually used an estimated account to calculate her figure. If one takes out a 1 year fixed rate bond (taxable) and interest is paid on maturity, most banks will issue a new account number, so if a bank paid 1k interest that will be shown on the list as an actual for this year but for next year it will be shown as an estimate even though the account was closed on maturity. Next year I'm sure HMRC will push me on to Self Assessment which might be a blessing or a curse.

I suggest everyone keeps a record of their untaxed interest and if necessary contact HMRC and as for a print out of the information given to them by banks and building societies.

Thanks again for the formula
 
arctine said:
5.03% is 80% surely, therefore 100% = 6.036%.
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No, that's adding 20% of the 80%, not 20% of the 'original' 100%.

5.03 x 1.2 = 6.036
80 x 1.2 = 96

You need to divide by 0.8, rather than multiply by 1.2 to replace the 'missing' 20% in this context.

5.03/0.8 = 6.29
80/0.8 = 100
 
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aardvark said:
i dont even know what you are asking
Click to expand...

"Assuming I would get taxed at 20% on my savings interest, what interest rate would I need to find on a taxable savings accounts for my eventual returns to match (or exceed) a tax free ISA that pays 5.03%?"
 
Kenai said:
I think 5.03/80 * 100 is the formula that you want to work in that direction then.

Bear in mind, you may have other allowances that mean you don't get taxed on all your interest earnings, make sure you've checked what you're entitled to and how much difference that might make.
Click to expand...
Indeed.


GROSS * ((100 - taxation rate)/100) = NET

Solve for GROSS:

GROSS = NET / ((100 - taxation rate)/100)

so in this case

GROSS = 5.03 / ((100-20)/100)
GROSS = 5.03 / 0.8

GROSS = 6.2875
 
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Depending on your tax bracket, you may get a personal savings allowance
£1000 if you're in the 20% tax bracket
£500 if you're in the 40% tax bracket

For me the interest rates are higher in my savings account than my ISA, as the "tax free" amount is taken out of the interest rate even before it's calculated.

There's a calculator somewhere on the www that will work out which is the better one for the amount you have in the account. I'll try to find it.
 
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