Personal Savings Allowance

SMITHPIM

Hi I am new to this not sure how it works. Does anyone know whether cash back from banks counts as interest as far as the Personal Savings Allowance is concerned? I have a Santander 123 so get cash back payments on many of my bills. Any input on this would be appreciated. Thanks

Vortigern

Cash back is not treated as interest. It's a discount on a purchase.

Terry_Towelling

Vortigern wrote: »

Cash back is not treated as interest. It's a discount on a purchase.

Agreed it won't be seen as interest and I can understand it being seen as a discount if it is paid by the retailer rather than the bank, but if the cash is just coming out of the banks profits is it actually taxable income?

Vortigern

Terry_Towelling wrote: »

Agreed it won't be seen as interest and I can understand it being seen as a discount if it is paid by the retailer rather than the bank, but if the cash is just coming out of the banks profits is it actually taxable income?

It's not reported to HMRC as income, unlike the Halifax Reward which is reported (and taxed)

Perhaps it is indirectly paid by the retailer via the amount they pay the bank to take part in the scheme?

londoninvestor

Vortigern wrote: »

Perhaps it is indirectly paid by the retailer via the amount they pay the bank to take part in the scheme?

I think effectively it is - the bank takes a merchant fee from the retailer and gives you part of it. Like Quidco etc take comissions from retailers and pay you part of it.

I'm not an expert but I think the difference with Halifax's rewards is that those aren't just connected to having DDs (in fact the amount of the DDs is entirely irrelevant as long as you have two DDs). Because the reward also depends on your actual finances in the sense that to get it you need to make a minimum payin amount and remain in credit, HMRC treats it as "interest-like".

Dazed_and_confused

"interest-like"

Not come across that phrase before!

Halifax Reward is taxable income but is not interest.

So it cannot be taxed at either of the 0% rates applicable to interest (savings starter rate or savings nil rate aka Personal Savings Allowance).

londoninvestor

Dazed_and_confused wrote: »

Not come across that phrase before!

My own loose terminology! You're right of course that it's not taxed quite like interest.