Do Switching Bonuses / Ongoing 'rewards' eat into either Tax free Savings or Trading allowance?

orange-juice

Just curious whether either switching bonuses or ongoing monthly rewards (like the fiver from Halifax, RBS/NatWest), eat into the £1000 savings (Basic rate tax payer) or trading allowance?

I imagine it doesn't otherwise it would be heavily emphasised on the main MSE articles, but you never know.

Bridlington1

Switching bonuses and most ongoing monthly rewards are classed as cashback and thus tax-free. The only exceptions I can think of are the co-op £1 monthly reward for paying out 4 DDs in a month and the Halifax reward account but only if you choose to keep £5k in the account continuously for the £5. Both of these are already paid with 20% tax taken off.

alternate

Neither are interest.  They are technically income.  There was some debate a while back over if Barclays Blue Rewards should be included in your tax return.

wmb194

alternate said:

Neither are interest.  They are technically income.  There was some debate a while back over if Barclays Blue Rewards should be included in your tax return.

Apart from the Co-op and Halifax exceptions Bridlington mentions, they're not income, they're cashback i.e. not taxable income. Not that it's worth having anymore for most people, Barclays Blue was restructured by Barclays to make it a cashback payment so these days it's a non-issue.

Rudyson

I believe referral bonuses are income

masonic

Rudyson said:

I believe referral bonuses are income

It depends whether you are the person doing the referring or being referred. Someone who refers people to an organisation is effectively receiving an income for affiliate marketing. A case could probably be made that this is the sort of thing the £1k trading allowance could cover.

Rudyson

masonic said:

Rudyson said:

I believe referral bonuses are income

It depends whether you are the person doing the referring or being referred. Someone who refers people to an organisation is effectively receiving an income for affiliate marketing. A case could probably be made that this is the sort of thing the £1k trading allowance could cover.

I meant the person doing the referring, and for exactly the reason you state

orange-juice

Bridlington1 said:

Switching bonuses and most ongoing monthly rewards are classed as cashback and thus tax-free. The only exceptions I can think of are the co-op £1 monthly reward for paying out 4 DDs in a month and the Halifax reward account but only if you choose to keep £5k in the account continuously for the £5. Both of these are already paid with 20% tax taken off.

Interesting, is the classification set by HMRC or is it deemed as cashback by the banks? Maybe in their T&C's?

masonic

orange-juice said:

Bridlington1 said:

Switching bonuses and most ongoing monthly rewards are classed as cashback and thus tax-free. The only exceptions I can think of are the co-op £1 monthly reward for paying out 4 DDs in a month and the Halifax reward account but only if you choose to keep £5k in the account continuously for the £5. Both of these are already paid with 20% tax taken off.

Interesting, is the classification set by HMRC or is it deemed as cashback by the banks? Maybe in their T&C's?

It is the bank that determines which category it is in by the way they structure it. The classic example is Halifax Reward Extra, where getting £5 per month on a debit card spend of £500 is cashback as it is treated as a discount on your purchases, whereas the £5 for keeping £5000 in your account is treated as a taxed at source annual payment as no purchase is required. If a bank decides a particular reward is taxable, then there is not a lot you can do about it.

Hazzanet

orange-juice said:

Interesting, is the classification set by HMRC or is it deemed as cashback by the banks? Maybe in their T&C's?

https://community.hmrc.gov.uk/customerforums/sa/232aafbc-a756-ec11-a3ee-00155d9742fa

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim8020