Halifax Reward and the new Tax free Savings

Mrs_Arcanum

Curious as to how this will work with the new savings tax-free threshold.

Currently, Halifax pay £1.25 in tax to the treasury for every monthly £5 reward to the customer. So how will this work when the new tax-free threshold comes into effect? Will Halifax simply stop paying the treasury and not pass on the saving to the customer or what?

grumbler

I don't see how rewards can be classed as interest.

Steve_xx

grumbler wrote: »

I don't see how rewards can be classed as interest.

Neither do I, but they could be classed as 'income'.

grumbler

Yes, but this income has nothing to do with the new tax-free savings interest threshold.

planteria

i think it may well be classed as 'interest' and contribute towards our £1k/yr threshold.

Biggles

Halifax do treat it as interest net of income tax so, to be consistent, they should be paying us £6.25 a month after 6 April. I shan't hold my breath, though.

grumbler

Biggles wrote: »

Halifax do treat it as interest net of income tax

They credit it net of tax, that doesn't mean that it's interest.

Steve_xx

grumbler wrote: »

Yes, but this income has nothing to do with the new tax-free savings interest threshold.

I think that remains to be clarified. But even if it did not, then it would be added to your income and therefore you'd be taxed via that route I reckon. Maybe there's a way out of it if it's regarded as a gift? There's a bit of a similar grey area with the "cashback" on Santander's 123 current account.

mapk

The following from a(n) HBOS customer manager after a recent query: 'The Reward accounts which you hold do not attract any interest; there is a £5 monthly Reward payment which is paid as long as the criteria are met'.

I also learnt, incidentally, that 'Bank of Scotland and Halifax are now operating independently', so HBOS is something of a misnomer. A load of old BoS/H perhaps?

colsten

mapk wrote: »

The following from a(n) HBOS customer manager after a recent query: 'The Reward accounts which you hold do not attract any interest; there is a £5 monthly Reward payment which is paid as long as the criteria are met'.

You appear to have got hold of another utterly clueless bank employee. The correct answer is in the Reward T&Cs:

*£5 reward paid in the following calendar month if in the previous calendar month you pay in to your account £750 or more and pay out of your account a minimum of two different direct debit instructions and keep your account in credit all calendar month. You also need to keep your account open or not change it to a different type of current account before the reward payment is due to be paid into your account. This payment is ‘net’ of income tax, which means we pay it after taking off income tax at the rate set by law (currently 20%). If you’re a higher-rate taxpayer, you may have to pay extra income tax on the reward payment. (The gross amount is £6.25. This is the amount before income tax is taken off.)

As to whether the Reward payment will be paid gross after April 6th 2016: I don't believe it will, as it is a reward payment, not interest. Only interest will be paid without tax deduction. I have, however, not seen any statement from Halifax (or from COOP about their reward payment) to confirm my belief.

mapk wrote: »

I also learnt, incidentally, that 'Bank of Scotland and Halifax are now operating independently', so HBOS is something of a misnomer. A load of old BoS/H perhaps?

Yep, load of old BoS/H. I still access both, my Halifax and my BoS accounts through the same online session. I am pretty certain they aren't making an exception especially for me.

colsten

Steve_xx wrote: »

Maybe there's a way out of it if it's regarded as a gift? There's a bit of a similar grey area with the "cashback" on Santander's 123 current account.

There is nothing grey about cashback: Cashback is a discount on a purchase. You do not have to pay tax on a discount.