How can Nationwide's Fairer Payment be interest?

bristolleedsfan

WillPS said:

35har1old said:

eskbanker said:

It's not categorised as interest as such but "taxable savings income", albeit taxed in the same way as interest:

The payment is taxable savings income. This means that it is treated in the same way as any interest you may earn on your savings account or current account.

Some fixed-value payments made from reward current accounts, for example, are also treated like this, despite not being derived according to 'balance times rate' interest calculations as such.

The Halifax reward account is paid out after tax is paid

Only if you choose the (rubbish) '[£5] reward for keeping £5000 in your account' option. The sensible/good '[£5] reward for making £500 worth of debit card payments' option is cashback, and therefore not taxable. 

https://forums.moneysavingexpert.com/discussion/comment/75909081/#Comment_75909081

https://www.litrg.org.uk/tax-guides/other-tax-issues/savings-and-tax#toc-my-bank-account-pays-rewards-does-the-personal-savings-allowance-apply-to-them-

If the reward takes the form of a cash reward (not related to the account balance), for say depositing a certain amount per month, this is not savings income, but is probably an ‘annual payment’ (applicable even if reward is paid monthly). Banks must deduct tax at 20% before paying you the cash reward, and the gross amount of the cash reward is taxable. Since annual payments are not savings income, these types of reward are not eligible for the PSA (or the starting rate for savings). If you are not liable to tax you can reclaim any tax deducted by completing an R40 form or on your Self Assessment tax return. If you are a higher-rate taxpayer you would need to pay the extra amount to HMRC, for example, via a PAYE coding adjustment or through your tax return.

https://www.halifax.co.uk/bankaccounts/current-accounts/reward-current-account/#collapse1-1499459832070

When we pay you the £2 Reward we are required by legislation to pay tax of £0.50 to HMRC on your behalf, so the gross reward is £2.50. The tax paid is 20% (current basic rate of income tax) of the gross amount. If you are a higher rate or additional rate taxpayer it is your responsibility to pay any additional tax due.


https://inews.co.uk/inews-lifestyle/money/saving-and-banking/ask-jenny-do-i-owe-tax-on-the-money-i-make-from-current-account-rewards-1810603#:~:text=But the £5 you get each month from,payments (so the gross monthly reward is £6.25).

• But the £5 you get each month from your Halifax Reward account isn’t classed as savings income. This means it isn’t covered by the personal savings allowance and so is taxable. Halifax automatically deducts basic-rate tax of 20 per cent before making these reward payments (so the gross monthly reward is £6.25).

WillPS

bristolleedsfan said:

WillPS said:

35har1old said:

eskbanker said:

It's not categorised as interest as such but "taxable savings income", albeit taxed in the same way as interest:

The payment is taxable savings income. This means that it is treated in the same way as any interest you may earn on your savings account or current account.

Some fixed-value payments made from reward current accounts, for example, are also treated like this, despite not being derived according to 'balance times rate' interest calculations as such.

The Halifax reward account is paid out after tax is paid

Only if you choose the (rubbish) '[£5] reward for keeping £5000 in your account' option. The sensible/good '[£5] reward for making £500 worth of debit card payments' option is cashback, and therefore not taxable. 

https://forums.moneysavingexpert.com/discussion/comment/75909081/#Comment_75909081

https://www.litrg.org.uk/tax-guides/other-tax-issues/savings-and-tax#toc-my-bank-account-pays-rewards-does-the-personal-savings-allowance-apply-to-them-

If the reward takes the form of a cash reward (not related to the account balance), for say depositing a certain amount per month, this is not savings income, but is probably an ‘annual payment’ (applicable even if reward is paid monthly). Banks must deduct tax at 20% before paying you the cash reward, and the gross amount of the cash reward is taxable. Since annual payments are not savings income, these types of reward are not eligible for the PSA (or the starting rate for savings). If you are not liable to tax you can reclaim any tax deducted by completing an R40 form or on your Self Assessment tax return. If you are a higher-rate taxpayer you would need to pay the extra amount to HMRC, for example, via a PAYE coding adjustment or through your tax return.

https://www.halifax.co.uk/bankaccounts/current-accounts/reward-current-account/#collapse1-1499459832070

When we pay you the £2 Reward we are required by legislation to pay tax of £0.50 to HMRC on your behalf, so the gross reward is £2.50. The tax paid is 20% (current basic rate of income tax) of the gross amount. If you are a higher rate or additional rate taxpayer it is your responsibility to pay any additional tax due.


https://inews.co.uk/inews-lifestyle/money/saving-and-banking/ask-jenny-do-i-owe-tax-on-the-money-i-make-from-current-account-rewards-1810603#:~:text=But the £5 you get each month from,payments (so the gross monthly reward is £6.25).

• But the £5 you get each month from your Halifax Reward account isn’t classed as savings income. This means it isn’t covered by the personal savings allowance and so is taxable. Halifax automatically deducts basic-rate tax of 20 per cent before making these reward payments (so the gross monthly reward is £6.25).

Outdated info relating to the old scheme, which was closed in 2020. Relevant info is on the bottom of page 2 and top of page 3 of this doc: https://www.halifax.co.uk/assets/pdf/bankaccounts/pdf/banking-offers-guide.pdf

Specifically:

If you choose the Offer to keep £5,000 or more in your account, the Monthly Reward will be paid 'net' after the deduction of income tax at the rate set by law (currently 20%). The gross value of the Monthly Reward before income tax is taken off is £6.25. If you're a higher rate tax payer, you may have to pay extra income tax on the Monthly Reward directly to HMRC. If we have deducted more tax than you have to pay you may be able to claim it back from HMRC

[otherwise]

This Monthly Reward is a "cashback" and is not taxable in the UK.

That Halifax link you shared doesn't contain the wording you suggest, because Halifax haven't paid a £2 net reward since 2020. (I think Bank of Scotland possibly still do, if anyone still holds a Bank of Scotland Reward account?)