Bank Switch Bonus

subjecttocontract

Do I need to pay tax on bank switching payments/bonus ?

MikeJXE

No it is classed as a cash back 

grumbler

MikeJXE said:

No it is classed as a cash back 

Sure? You can get cashback only if you pay for something.

Cashback is sort of discount, that's why it's not income.

35har1old

MikeJXE said:

No it is classed as a cash back 

Does that apply to a token of apology payment or Halifax reward payment

subjecttocontract

Seems there is some uncertainty. It's all income so you can either choose to ignore it or assume it's taxable.......I'd just like a definitive answer.

WillPS

Opinions differ and you won't find a definitive answer.

wmb194

Obviously this has come up before.

I had a link that I cannot now find to a HMRC community page where an "HMRC Amin" replied to this question from a member of the public and said that one-off payments to switch an account aren't classified as taxable income but if it's a payment relating to a referral you made to someone else to open an account it is classified as taxable income. So this would e.g., capture Co-op Bank's recent refer a friend offer.

https://optimalcompliance.com/are-bank-incentives-increasing-your-tax-bill/

https://forums.moneysavingexpert.com/discussion/6422321/do-switch-bonuses-count-as-taxable-income

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

dealyboy

... not related to this payment type, but to mention for wider interest ...

I received a payment from Santander last year because they informed me I had overpaid for my car insurance in 2019, I received compensation of about £30 which included interest of about £7 gross which was subject to income tax of about £2 (apparently compensation interest is taxable HMRC).

Zanderman

dealyboy said:

... not related to this payment type, but to mention for wider interest ...

I received a payment from Santander last year because they informed me I had overpaid for my car insurance in 2019, I received compensation of about £30 which included interest of about £7 gross which was subject to income tax of about £2 (apparently compensation interest is taxable HMRC).

I don't think that's entirely correct.

Compensation interest is paid to you with tax deducted (unlike bank interest) but if your total interest in a tax year is below your allowance for tax-free interest you can claim any tax paid (in this case £2) back from HMRC (probably not worth it for £2 though!).

Anyway this is irrelevant for the question about bank switch bonuses asked by the OP. 

35har1old

Zanderman said:

dealyboy said:

... not related to this payment type, but to mention for wider interest ...

I received a payment from Santander last year because they informed me I had overpaid for my car insurance in 2019, I received compensation of about £30 which included interest of about £7 gross which was subject to income tax of about £2 (apparently compensation interest is taxable HMRC).

I don't think that's entirely correct.

Compensation interest is paid to you with tax deducted (unlike bank interest) but if your total interest in a tax year is below your allowance for tax-free interest you can claim any tax paid (in this case £2) back from HMRC (probably not worth it for £2 though!).

Anyway this is irrelevant for the question about bank switch bonuses asked by the OP. 

If you have not exceeded yout tax allowance you should be able to claim tax paid on the likes of Halifax rewards

dealyboy

Zanderman said:

dealyboy said:

... not related to this payment type, but to mention for wider interest ...

I received a payment from Santander last year because they informed me I had overpaid for my car insurance in 2019, I received compensation of about £30 which included interest of about £7 gross which was subject to income tax of about £2 (apparently compensation interest is taxable HMRC).

I don't think that's entirely correct.

Compensation interest is paid to you with tax deducted (unlike bank interest) but if your total interest in a tax year is below your allowance for tax-free interest you can claim any tax paid (in this case £2) back from HMRC (probably not worth it for £2 though!).

Anyway this is irrelevant for the question about bank switch bonuses asked by the OP. 

Thanks @Zanderman ... there is a little bit more to it, but as you say it is a distraction.