Do switch bonuses count as taxable income?

Oasis1

Say theoretically you have a taxable income of £50,071pa including interest on savings etc. You get a £200 bonus for switching current accounts. Are you now in the higher rate tax band?

Just trying to calculate how much salary sacrifice to do in March to keep me below £50,270 taxable income so I can retain £1000 basic rate personal savings allowance.

MikeJXE

I asked that question last week and the answer was apparently NO

Ed-1

Oasis1 said:

Say theoretically you have a taxable income of £50,071pa including interest on savings etc. You get a £200 bonus for switching current accounts. Are you now in the higher rate tax band?

Just trying to calculate how much salary sacrifice to do in March to keep me below £50,270 taxable income so I can retain £1000 basic rate personal savings allowance.

No, switch bonuses are cashback which is not taxable.

Oasis1

Thank you both

Matt17

In the cooperative bank refer a friend t&c's it says:

As we are paying you for recommending your Friend, you must consider your personal tax position.

MikeJXE

From the horses mouth

HMRC has commented that many incentives offered by banks and other account providers are not taxable. For example, cashback payments and switching incentives offered to bank customers to switch current accounts are not taxable.

Shedman

If you receive a switch bonus for opening a new account (even if its through refer a friend schemes) it will be non taxable. 

However, if you are the person giving a referral to someone else (who say goes on to open an account) such that you get a bonus for giving that referral then technically that referral bonus is taxable income (as Other Income) as it is effectively regarded as the same as commission.

Zanderman

Shedman said:

If you receive a switch bonus for opening a new account (even if its through refer a friend schemes) it will be non taxable. 

However, if you are the person giving a referral to someone else (who say goes on to open an account) such that you get a bonus for giving that referral then technically that referral bonus is taxable income (as Other Income) as it is effectively regarded as the same as commission.

In the cooperative bank refer a friend t&c's it says:

As we are paying you for recommending your Friend, you must consider your personal tax position.

Indeed, not all these bonuses are the same, in tax terms, as each other. Most switch bonuses are not taxable but some of the more complex ones are, er, more complex. 

A simple cashback switch bonus is not taxable

But as as Shedman and Matt17 point out any income from referrals can be taxable income, depending on whether you're the referrer or the referee.   The Coop Bank T&C specifically highlight the tax issue for those doing the referring for Coop but not for those being referred.  There are some people who get a lot of income from referrals - some including the recent Coop bank offers - who may have to consider their tax returns!

youngretired

Does anyone know if the Co-op tell HMRC of any referral payments made? As if you don't complete a self assessment, then how do you tell them? I'm only talking about a couple of referrals not loads. 

WillPS

youngretired said:

Does anyone know if the Co-op tell HMRC of any referral payments made? As if you don't complete a self assessment, then how do you tell them? I'm only talking about a couple of referrals not loads. 

I don't believe they do, ISTR their terms merely absolved themselves of responsibility for paying any tax due on them.

saajan_12

What id think logically, but take with a pinch of salt as tax code isn't always logical:

Incentives to open your account is like a discount, for doing your own admin - not taxable.

Referral bonuses for referring someone else is effectively doing work for the bank to get them a new customer, for which they pay you - taxable