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Where Taxpayers and Advisers Meet

Bank's/Savings referral/welcome bonuses

GLam
Posts:2
Joined:Tue Aug 10, 2021 9:58 pm
Bank's/Savings referral/welcome bonuses

Postby GLam » Sat Sep 25, 2021 8:00 am

Hi all

I recently joined a savings provider and will receive a 'welcome bonus' presumably this will be taxable? If so, will this count as income or savings interest?

Similarly, the provider offers referral bonuses so that my friend and I receive bonus each, again presumably this is taxable, is this income or savings interest?

pawncob
Posts:4746
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Bank's/Savings referral/welcome bonuses

Postby pawncob » Mon Sep 27, 2021 7:20 pm

Bonuses are part of interest.
With a pinch of salt take what I say, but don't exceed your RDA

bd6759
Posts:3586
Joined:Sat Feb 01, 2014 3:26 pm

Re: Bank's/Savings referral/welcome bonuses

Postby bd6759 » Tue Sep 28, 2021 7:15 am

Bonuses are part of interest.
Bonuses are not interest.

bd6759
Posts:3586
Joined:Sat Feb 01, 2014 3:26 pm

Re: Bank's/Savings referral/welcome bonuses

Postby bd6759 » Tue Sep 28, 2021 7:17 am

The tax treatment depends on whether it is a business receipt. See here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim100210

robbob
Posts:3147
Joined:Wed Aug 06, 2008 4:01 pm

Re: Bank's/Savings referral/welcome bonuses

Postby robbob » Tue Sep 28, 2021 8:52 am

I recently joined a savings provider and will receive a 'welcome bonus' presumably this will be taxable? If so, will this count as income or savings interest?
Can you advise if you run a trade ,if its not "interest" and its trade related its likely to be taxable and will need to be reported in the same manner as any other business income - if its "interest" it will be delared as appropriate based on business type
If not trade related i would probably seek advise from the instiution themselves as first point of call to clarify payment type and tax treatment from their point of view and the read guidance they provide - use that as a starting basis to follow info below and make your ultimate decision.
Unfortuantely if in doubt directly questiong hmrc in writing is your best bet if you want to cover your back.

It is 100% unclear to me whether "welcome bonus" is actually a "cashback" as referenced in bim100210 (if i had to guess i would say it probably is "cashback" if its directly related to switching - but thats pure guess and no more) or whether it may follow along the lines of "reward payments" which themselves have somewhat variable tax treatment.

the clearest advise on the subject of reward payments is probably available here - there are 3 options.

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/savings-and-tax

Hopefully this somewhat confusing advise evidences the somewhat inconsistent and variable treatment of what can be very similar "payment types"

Note if it is misc income you may have a get out clause here in that you can have £1000 Total (all sources) of miscellaneous income each tax year without having to report that income to hmrc - so if it is taxable but deemed miscellaneous income and you sum total of miscellaneous income is under 1k no action needed and no tax will be due.
Similarly, the provider offers referral bonuses so that my friend and I receive bonus each, again presumably this is taxable, is this income or savings interest?
As per link supplied by bd6759 the advise is fairly clear - this is likely to be income of trade if you have trade or miscellaneous taxable incoem if not (in which case it may be covered by £1000 misc income exemption)

pawncob
Posts:4746
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Bank's/Savings referral/welcome bonuses

Postby pawncob » Tue Sep 28, 2021 10:09 am

bd6759- sorry, I missed the word "referral".
If the reward takes the form of a cash reward (not related to the account balance) AND there is a fee for the account, the reward does not meet the conditions for an annual payment. It is still taxable however as ‘miscellaneous payment’. Banks do not have to deduct tax before paying you the cash reward, so you receive these rewards gross and the gross amount is taxable. These types of reward are not savings income, so they are not eligible for the PSA (or the 0% starting rate for savings). If you are a basic or higher-rate taxpayer you would need to pay any tax due to HMRC via a PAYE coding adjustment or through your tax return.’
More here: https://www.taxadvisermagazine.com/article/savings-income-issues-including-bank-accounts-paying-%E2%80%98rewards%E2%80%99
With a pinch of salt take what I say, but don't exceed your RDA


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