TSB £5 Cashback - how taxed?

Fred_Harry

Does anybody know how the TSB Classic Plus £5.00 cashback for 2 direct debits should be treated on the SA Tax Return?

Is it paid gross or net of 20% income tax?

aj23_2

Fred_Harry wrote: »

Does anybody know how the TSB Classic Plus £5.00 cashback for 2 direct debits should be treated on the SA Tax Return?

Is it paid gross or net of 20% income tax?

Everything is paid gross now.

Are you getting more than £1,000 per tax year in interest? If not then I wouldn't worry.

Vortigern

aj23 wrote: »

Everything is paid gross now.

Are you getting more than £1,000 per tax year in interest? If not then I wouldn't worry.

Halifax Reward is not paid gross, and it's not interest, so is not covered by the savings allowance.

I'm not sure of the position with TSB's bonus for 2 DDs. Could be similar?

Dox

Cashback isn't subject to tax.

ValiantSon

It's cashback, not interest. It is not subject to tax, in the same way that switching bonuses are not subject to tax.

glider3560

Vortigern wrote: »

Halifax Reward is not paid gross, and it's not interest, so is not covered by the savings allowance.

It's considered an "annual payment" (even though it is paid monthly). See https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim8010

Marcon

TSB pays cashback (not bonus as stated above) on DDs. Not subject to tax.

demeter

I'm filling in my tax return but needed more information on the tax position. I tried asking the TSB helpline and they had no idea. it's potentially even more complicated with the PSA ‘personal savings allowance’.

This is what I found online on litrg.org.uk

If you have a reward account, to check the tax position, you need to find out the following information –

The type of reward;
Whether the bank pays you the reward gross or net of tax (and if net, how much tax is deducted at source);
Whether the reward is taxable income;
Whether the reward is potentially eligible for the PSA, depending on your circumstances.
There are three main possible tax treatments, depending on the type of reward:

If the reward takes the form of interest (i.e. a rate based on the account balance), it is savings income and eligible for the PSA. Banks should pay this to you gross without deducting 20% tax at source, but it is still taxable income.
If the reward takes the form of a cash reward (not related to the account balance), for say depositing a certain amount per month, this is not savings income, but is probably an ‘annual payment’ (applicable even if reward is paid monthly). Banks must deduct tax at 20% before paying you the cash reward, and the gross amount of the cash reward is taxable. Since annual payments are not savings income, these types of reward are not eligible for the PSA (or the 0% starting rate for savings). If you are not liable to tax you can reclaim any tax deducted by completing an R40 form or on your self-assessment tax return. If you are a higher-rate taxpayer you would need to pay the extra amount to HMRC, e.g. via a PAYE coding adjustment or through your tax return.
If the reward takes the form of a cash reward (not related to the account balance) AND there is a fee for the account, the reward does not meet the conditions for an annual payment. It is still taxable, however as 'miscellaneous payment'. Banks do not have to deduct tax before paying you the cash reward, so you receive these rewards gross and the gross amount is taxable. These types of reward are not savings income, so they are not eligible for the PSA (or the 0% starting rate for savings). If you are a basic or higher-rate taxpayer you would need to pay any tax due to HMRC, e.g. via a PAYE coding adjustment or through your tax return.

It was looking like the TSB DD reward should be an annual payment however on a Which? webpage I found this:
Are current account rewards taxable?
Some rewards are considered taxable by HM Revenue & Customs (HMRC) and some aren’t. It all comes down to how the taxman categorises rewards for tax purposes. Broadly, there are three possibilities:

• Annual payments: taxable and paid with basic-rate tax deducted at source
• Miscellaneous income: taxable but paid without tax deducted
• Neither annual payments nor miscellaneous income: not taxable and paid without tax deducted

HMRC explained to Which? that it would only expect current-account rewards to be annual payments if they continue for more than a year and the customer does not pay a fee for holding the account.
Cashback on household bills, offered by the likes of Santander and NatWest, are essentially a discount on goods or services, not income – so there is no tax to pay.

The TSB DD reward stopped after a year so HMRC might well consider this as "Neither annual payments nor miscellaneous income: not taxable and paid without tax deducted" but I'd be happier if TSB confirmed this. It it was taxable or tax had been paid surely TSB would have said. But this is TSB and how much can I trust them after their online banking fiasco. I won't bother putting it on my tax return unless someone knows different.

PRAISETHESUN

My understanding is that it is cashback and thus not taxable. Interest however is taxable above the personal allowance for your tax bracket.

demeter

yes - reading the Which? page again - Barclays redefined one of their rewards for DDs as cashback to make it tax free

aj23_2

Cashback isn't taxable.