Halifax Reward and the new Tax free Savings
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For a payment to be an annual payment, according to HMRC's SAIM8020, it needs to be "pure income profit", and SAIM8040 states it's critical "whether payments can be said to be made in return for something the recipient has provided, and has incurred expenditure on providing."
Barclays Blue rewards, unlike the Halifax rewards, are contingent on paying a fee, i.e. you have to incur expenditure to get the reward. As such, they're not pure profit, so they don't count as "annual payments". They don't (as best I can tell) fit into any other category of taxed income, either, so I think it's correct* that Barclays Blue rewards aren't taxed.
It does beg the question why Halifax don't just add a 1p fee and increase the reward to £5.01, thus removing the tax obligation...
(* "correct" with the meaning of "in accordance with HMRC guidance" rather than with the meaning of "makes any sense whatsoever".)
Donovan stated that an annual payment is not solely money out of the blue. In all the cases we are considering there is a contract and hence an expectation of profit. In my opinion the money paid by Barclays consists of a return of capital and a remainder that is pure profit. In the £5.01 Halifax idea you suggest there would be a one penny return of capital and £5 of pure profit. There would be a liability to tax in both cases
I will be declaring £4 per month from Barclays and £6.25 per month from Halifax as other income, the former untaxed and the latter already taxed at £1.25 per month.0 -
For tax returns, I think this comes in as "other income":
- On page 2 of "Tailor your return", for "Did you receive any other UK income, …", select "Yes"
- Under "Other UK income", tick "Any other income"
- On the following page, put the gross payment (£6.25/month, so £75, assuming you didn't miss any payments) in the "Other taxable income" box
- Put the tax (£1.25/month, so £15 assuming you didn't miss any payments) in the "Tax taken off income box"
- Write something to the effect of "Annual payments received in return for holding a Halifax Reward Current account" in the "Description" box.
I can't imagine this situation is going to persist for long; the "other income" pages are clearly not intended for many people to ever use, but there's going to be a lot of people who will now be filling them in (or at least who ought to be).
If you've historically reported the payments as interest (as I have), I think technically you ought to notify HMRC of the errors. You can still do this online for the 2014/15 tax year, but you need to write to HMRC for previous years. That said, as I understand it, reporting the income as interest rather than an annual payment won't have made any difference to the actual tax due (at least until 2016/17), which means there's nothing extra to pay to HMRC and no penalty HMRC could assess for not telling them.
Whether or not you declare it as interest or an annual payment prior to 2016/17, from 2016/17 onwards you probably want to declare it as an annual payment (and declare the tax paid); if you're a basic rate tax payer who isn't up to the Personal Savings Allowance, it'll make no difference, but if you pay tax at any rate other than the basic rate, or you earn enough taxable interest to take you over the PSA, you'll be out of pocket if you don't.
As for claiming tax back on an R40 form, I honestly have no idea. As best I can tell treating the reward payments as an annual payment essentially means you just shouldn't be able to claim it back.
As this looks like the correct answer, it would be nice if Martin could include it in the rather vague page http://www.moneysavingexpert.com/news/banking/2016/07/halifax-barclays-or-co-op-bank-customer-you-may-need-to-pay-tax-on-your-rewards which talks about "annual payments" as if everyone knows what that means!
And thanks for your help!0 -
In the meantime, anyone wanting their info sooner (and from the horses mouth) could pop along to the HMRC website, type 'annual payments' in the search box, click the 7th result returned, and read.As this looks like the correct answer, it would be nice if Martin could include it in the rather vague page http://www.moneysavingexpert.com/news/banking/2016/07/halifax-barclays-or-co-op-bank-customer-you-may-need-to-pay-tax-on-your-rewards which talks about "annual payments" as if everyone knows what that means!
And thanks for your help!
https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim80200 -
So for Halifax Reward I need to submit as £6.25 x 12 under "other income"? I'm completing an online self assessment so if you could mention precise location on the form that would help tremendously.0
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Superstar! Halifax actually changed the rate in February so it will be £67.50 in box 17 and £13.50 in box 19. I will mention "Halifax reward" in box 21 and that should be job done.
Which will be £67.00 and £14.00 because they want you to round down / up. (Page TR 1 says "round down income and round up expenses and tax paid, it is to your benefit")Goals
Save £12k in 2017 #016 (£4212.06 / £10k) (42.12%)
Save £12k in 2016 #041 (£4558.28 / £6k) (75.97%)
Save £12k in 2014 #192 (£4115.62 / £5k) (82.3%)0 -
TrustyOven wrote: »Which will be £67.00 and £14.00 because they want you to round down / up. (Page TR 1 says "round down income and round up expenses and tax paid, it is to your benefit")
Thanks, I do remember this rule but if I recall when doing online the system does it automatically.0
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