Rewards Are they taxable, how will HMRC know ? 14 January at 11:52AM in Budgeting & bank accounts 16 replies 757 views

MikeJXE

In April for the first time I will be into income tax on my state pension. 

My state pension does not presently have tax deducted but I have 2 very small private pensions, £1300 per year that take me over the personal allowance threshold,  HMRC uses one of these for tax deductions. 

I understand all that and it's not a problem, I am also aware of savings interest allowances but

Bank switching rewards, current account interest, cash back current account. 

I am guessing they are all taxable but how will HMRC Know how much tax you need to pay ? 

Thank you in advance. 

wmb194

MikeJXE said:

In April for the first time I will be into income tax on my state pension. 

My state pension does not presently have tax deducted but I have 2 very small private pensions, £1300 per year that take me over the personal allowance threshold,  HMRC uses one of these for tax deductions. 

I understand all that and it's not a problem, I am also aware of savings interest allowances but

Bank switching rewards, current account interest, cash back current account. 

I am guessing they are all taxable but how will HMRC Know how much tax you need to pay ? 

Thank you in advance. 

They're not all taxable.

Switching money and cashback isn't, interest is. Interest earned is reported to HMRC every year and your tax code updated, but expect it to be wrong, have time lags etc..

Ed-1

MikeJXE said:

In April for the first time I will be into income tax on my state pension. 

My state pension does not presently have tax deducted but I have 2 very small private pensions, £1300 per year that take me over the personal allowance threshold,  HMRC uses one of these for tax deductions. 

I understand all that and it's not a problem, I am also aware of savings interest allowances but

Bank switching rewards, current account interest, cash back current account. 

I am guessing they are all taxable but how will HMRC Know how much tax you need to pay ? 

Thank you in advance. 

Most of them are classified as cashback which is non-taxable.

Some regular reward payments are still taxable and are paid with 20% tax already deducted. Halifax and Barclays reward payments are now classified as cashback though.

MikeJXE

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Zanderman

MikeJXE said:

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Interest is only taxable if the amount (of interest) is over £1000 for most people. 

In your case, if you're only just over the personal tax allowance anyway the interest amount would need to be even higher to be liable for tax.  

So I suspect you're over-worrying - tax is very unlikely to be payable on your interest.

Edited to add:  Have a look at this Gov page:  https://www.gov.uk/apply-tax-free-interest-on-savings

PS current account interest is treated no differently to savings account interest - you seem to imply you worry they are different, they're not.

Dazed_and_C0nfused

Zanderman said:

MikeJXE said:

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Interest is only taxable if the amount (of interest) is over £1000 for most people. 

In your case, if you're only just over the personal tax allowance anyway the interest amount would need to be even higher to be liable for tax.  

So I suspect you're over-worrying - tax is very unlikely to be payable on your interest.

Edited to add:  Have a look at this Gov page:  https://www.gov.uk/apply-tax-free-interest-on-savings

PS current account interest is treated no differently to savings account interest - you seem to imply you worry they are different, they're not.

Non ISA interest isn't taxable but otherwise interest is taxable income.

Some may be covered by unused Personal Allowance.

Or taxed at 0% via either the savings starter rate band of savings nil rate band (aka Personal Savings Allowance) but it's still taxable income.

MikeJXE

Zanderman said:

MikeJXE said:

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Interest is only taxable if the amount (of interest) is over £1000 for most people. 

In your case, if you're only just over the personal tax allowance anyway the interest amount would need to be even higher to be liable for tax.  

So I suspect you're over-worrying - tax is very unlikely to be payable on your interest.

Edited to add:  Have a look at this Gov page:  https://www.gov.uk/apply-tax-free-interest-on-savings

PS current account interest is treated no differently to savings account interest - you seem to imply you worry they are different, they're not.

I'm not worried at all. I know I can have a lot more than £1000 in interest on savings

I was curious to know more about tax on switching rewards and cash backs. 

Zanderman

MikeJXE said:

Zanderman said:

MikeJXE said:

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Interest is only taxable if the amount (of interest) is over £1000 for most people. 

In your case, if you're only just over the personal tax allowance anyway the interest amount would need to be even higher to be liable for tax.  

So I suspect you're over-worrying - tax is very unlikely to be payable on your interest.

Edited to add:  Have a look at this Gov page:  https://www.gov.uk/apply-tax-free-interest-on-savings

PS current account interest is treated no differently to savings account interest - you seem to imply you worry they are different, they're not.

I'm not worried at all. I know I can have a lot more than £1000 in interest on savings

I was curious to know more about tax on switching rewards and cash backs. 

Ok. Your opening post suggested you were curious about taxation on current account interest as well as rewards and cashback.

Zanderman

Dazed_and_C0nfused said:

Zanderman said:

MikeJXE said:

Thank you both.

Regarding interest might be wrong I will be keeping my own records on a spreadsheet.

Interest is only taxable if the amount (of interest) is over £1000 for most people. 

In your case, if you're only just over the personal tax allowance anyway the interest amount would need to be even higher to be liable for tax.  

So I suspect you're over-worrying - tax is very unlikely to be payable on your interest.

Edited to add:  Have a look at this Gov page:  https://www.gov.uk/apply-tax-free-interest-on-savings

PS current account interest is treated no differently to savings account interest - you seem to imply you worry they are different, they're not.

Non ISA interest isn't taxable but otherwise interest is taxable income.

Some may be covered by unused Personal Allowance.

Or taxed at 0% via either the savings starter rate band of savings nil rate band (aka Personal Savings Allowance) but it's still taxable income.

I think you mean ISA (not non ISA) interest isn't taxable.  Otherwise your post is saying, in effect, the same as mine as explained on the link I gave..

keiran

It would be super-great if a knowledgeable MSEr could list all the banks with their respective rewards, etc making clear which are taxable, which are "cashback", etc etc 

RG2015

keiran said:

It would be super-great if a knowledgeable MSEr could list all the banks with their respective rewards, etc making clear which are taxable, which are "cashback", etc etc 

If you have a specific account in mind a Google search should provide you with this information.

I doubt anyone here has all of this knowledge without researching themselves, and I can’t think why anyone would do this out of the goodness of their own hearts.

PS. Unless of course you want to prove me wrong.