Tax on Bank Loyalty Schemes

Bank loyalty schemes

Banks want to have your business! It seems like they will offer lots of bank loyalty schemes to get your business, but at what cost to you taxwise?

Many are offering cash to switch accounts, and having spoken to HMRC (via twitter I have to say), the switching amount is not taxable income. Woo Hoo. So if you are a limited company and it is in the accounts, I would put it as income, but in the tax return mark it as non-taxable. As a self employed person, I would not include it anywhere except as an “other information note” so at least you have told HMRC money was received, in case they have some way of checking up.

Cashback on bills are not taxable, but classed as discounts.

Now for individuals – those accounts you have to pay a fee for and you get money back, the money back is not classed as interest so is not covered by the savings allowance, but becomes taxable income. You just need to know if the reward is paid to you before tax (gross) or after tax has been deducted (net). The gross figure goes into “other taxable income” and if paid gross, you can then account for the tax already deducted. So if you are a 40% or 45% tax payer, you will have more tax to pay if given to you net. The bummer – you cannot offset the fee you pay to get this reward.

Further reading

Link to HMRC website regarding taxation of bank loyalty schemes.

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