Halifax Reward and the new Tax free Savings

zagfles

Archi_Bald wrote: »

What do you want them to clarify? What did they tell you when you asked them?

There has always been a clear distinction between interest and reward payments. Here are some extracts from the Halifax T&Cs:

How about what to declare it as on a tax return, or R40. There's no box marked "reward payments". There is a box for interest, and I'd wager most people incorrectly use that as per examples in this thread.

Just continually stating that they take 20% tax off and higher rate taxpayers "may" have to pay more is totally useless. And what's with the "may" - this implies some HRT payers may not have to pay extra. Why would there be any circumstances under which some HRT payers have to pay more tax and others don't?

They are totally unhelpful. They should be telling customers what to declare the reward payment as, in the T&C's or at least in writing/on their website somewhere.

Next people will be suggesting phoning them and asking :rotfl:Wonder if 5 of us try this how many different answers we'd get, and whether any would be correct.

polymaff

JRG wrote: »

It's about time that Halifax clarified the situation for their Reward account customers.

Maybe, but HMRC have made their position quite clear. It is taxable non-savings income. You declare it as taxable non-savings income. The same goes for the gain made on Barclays Blue Rewards. See:

http://www.hmrc.gov.uk/manuals/saimmanual/SAIM8000.htm

through to SAIM8050.

I'd love to think that this stops this thread dead in its tracks.

zagfles

polymaff wrote: »

Maybe, but HMRC have made their position quite clear.

HMRC make it clear as mud. As I said in post #38 - they say to include the reward payment in the interest section on the R40:

"Please include income received from building societies, banks [...] from current and deposit accounts "

People here have reported that HMRC staff have told them they should declare it as interest on tax returns. Even the HMRC manual sections on annual payments don't have an example like the Halifax Reward.

Neither HMRC nor Halifax are giving people a clear consistent answer.

Steve_xx

zagfles wrote: »

HMRC make it clear as mud. As I said in post #38 - they say to include the reward payment in the interest section on the R40:People here have reported that HMRC staff have told them they should declare it as interest on tax returns. Even the HMRC manual sections on annual payments don't have an example like the Halifax Reward.

Neither HMRC nor Halifax are giving people a clear consistent answer.

Whether you report it or not, if you're a basic rate payer, surely is of little consequence since HBOS have discharged the tax liabilty at basic rate?

zagfles

Steve_xx wrote: »

Whether you report it or not, if you're a basic rate payer, surely is of little consequence since HBOS have discharged the tax liabilty at basic rate?

Yes last year if you earned over the 0% savings band ie about £16k it won't make a difference. But this year it makes a difference even for those in the £16-43k earnings band because "annual payments" aren't included in the PSA! Which is why we need proper unequivocal guidance from Halifax and/or HMRC.

Steve_xx

zagfles wrote: »

Yes last year if you earned over the 0% savings band ie about £16k it won't make a difference. But this year it makes a difference even for those in the £16-43k earnings band because "annual payments" aren't included in the PSA! Which is why we need proper unequivocal guidance from Halifax and/or HMRC.

I still don't easily see why there's any need for a basic rate tax payer to be concerned because the liability is discharged for you whether you like it or not. Therefore on this alone you cannot possibly underpay your tax liability?

zagfles

Steve_xx wrote: »

I still don't easily see why there's any need for a basic rate tax payer to be concerned because the liability is discharged for you whether you like it or not. Therefore on this alone you cannot possibly underpay your tax liability?

But if you have to fill in a tax return you need to know where to declare it! You can't not declare it even if your liability is discharged. Taxable income is used for all sorts of other things as well such as tax credits, student loans etc, so you nee dto realise the payment needs grossing up (which interest now doesn't as it's paid gross).

me_and

For tax returns, I think this comes in as "other income":

• On page 2 of "Tailor your return", for "Did you receive any other UK income, …", select "Yes"
• Under "Other UK income", tick "Any other income"
• On the following page, put the gross payment (£6.25/month, so £75, assuming you didn't miss any payments) in the "Other taxable income" box
• Put the tax (£1.25/month, so £15 assuming you didn't miss any payments) in the "Tax taken off income box"
• Write something to the effect of "Annual payments received in return for holding a Halifax Reward Current account" in the "Description" box.

I can't imagine this situation is going to persist for long; the "other income" pages are clearly not intended for many people to ever use, but there's going to be a lot of people who will now be filling them in (or at least who ought to be).

If you've historically reported the payments as interest (as I have), I think technically you ought to notify HMRC of the errors. You can still do this online for the 2014/15 tax year, but you need to write to HMRC for previous years. That said, as I understand it, reporting the income as interest rather than an annual payment won't have made any difference to the actual tax due (at least until 2016/17), which means there's nothing extra to pay to HMRC and no penalty HMRC could assess for not telling them.

Whether or not you declare it as interest or an annual payment prior to 2016/17, from 2016/17 onwards you probably want to declare it as an annual payment (and declare the tax paid); if you're a basic rate tax payer who isn't up to the Personal Savings Allowance, it'll make no difference, but if you pay tax at any rate other than the basic rate, or you earn enough taxable interest to take you over the PSA, you'll be out of pocket if you don't.

As for claiming tax back on an R40 form, I honestly have no idea. As best I can tell treating the reward payments as an annual payment essentially means you just shouldn't be able to claim it back.

polymaff

me_and wrote: »

For tax returns, I think ...

Spot-on, me_.

zagfles

me_and wrote: »

For tax returns, I think this comes in as "other income":

• On page 2 of "Tailor your return", for "Did you receive any other UK income, …", select "Yes"
• Under "Other UK income", tick "Any other income"
• On the following page, put the gross payment (£6.25/month, so £75, assuming you didn't miss any payments) in the "Other taxable income" box
• Put the tax (£1.25/month, so £15 assuming you didn't miss any payments) in the "Tax taken off income box"
• Write something to the effect of "Annual payments received in return for holding a Halifax Reward Current account" in the "Description" box.

I can't imagine this situation is going to persist for long; the "other income" pages are clearly not intended for many people to ever use, but there's going to be a lot of people who will now be filling them in (or at least who ought to be).

If you've historically reported the payments as interest (as I have), I think technically you ought to notify HMRC of the errors. You can still do this online for the 2014/15 tax year, but you need to write to HMRC for previous years. That said, as I understand it, reporting the income as interest rather than an annual payment won't have made any difference to the actual tax due (at least until 2016/17), which means there's nothing extra to pay to HMRC and no penalty HMRC could assess for not telling them.

As I've said several times in this thread - it will make a difference to those who were in the 0% savings band ie earning between 10600 and 15600 last tax year, and who were in the 10% savings band in previous years.

If they declared it as interest, they will have paid too little tax and therefore owe HMRC. The 0%/10% band doesn't apply to "annual payments"

Whether or not you declare it as interest or an annual payment prior to 2016/17, from 2016/17 onwards you probably want to declare it as an annual payment (and declare the tax paid); if you're a basic rate tax payer who isn't up to the Personal Savings Allowance, it'll make no difference, but if you pay tax at any rate other than the basic rate, or you earn enough taxable interest to take you over the PSA, you'll be out of pocket if you don't.

As for claiming tax back on an R40 form, I honestly have no idea. As best I can tell treating the reward payments as an annual payment essentially means you just shouldn't be able to claim it back.

But the R40 form notes tell you declare it in the interest boxes if you follow the instructions!