Is Halifax Reward Taxable?

If you are wondering whether the Halifax Rewards received through cash-back payments are taxable or not, you will find the answer to your question in the following blog post; as well as detailed guidance on the tax implications of bank account rewards.

Is Halifax Reward Taxable?

Yes, the Halifax Reward account is taxable. The Halifax Reward account is subject to income tax since the £5 monthly payment received by account holders is classified as an annual payment rather than savings interest. This makes the payment taxable. 

To be eligible for the Halifax Reward account, customers must pay a minimum of £750 per month, maintain a positive balance, and payout at least two direct debits. Based on this, they will be eligible to receive a cash reward of £5 each month.

The amount of tax owed on Halifax Reward payments depends on the recipient’s income tax band. This means that basic-rate taxpayers will pay 20% tax on their gains, while higher-rate taxpayers will pay 40% tax on their payments, and additional-rate taxpayers will pay 45% tax on their payments. You can pay the tax you owe on your Halifax Reward payments when you file your tax return. 

At the same time, here are some other things to keep in mind about reporting your Halifax Reward payments on your tax return:

• you do not need to report the payments if you are a non-taxpayer
• you do not need to report the payments if you have already paid tax on them through PAYE
• you do not need to report the payments if you have closed your Halifax Reward account

However, if you believe you have paid too much tax on your Halifax Reward payments, you can claim a refund by completing a self-assessment tax return.

Does The Personal Savings Allowance Apply To Halifax Rewards Account?

No, the Halifax Reward account does not qualify for the personal savings allowance (PSA) since it doesn’t pay interest. At the same time, PSA applies to your cumulative savings interest from all sources, including bank accounts, savings accounts, and other investments.

Unlike traditional savings accounts and investments, the Halifax Reward account provides a monthly reward. This reward is categorised as an annual payment rather than savings interest, making it subject to income tax. 

Therefore, any rewards earned through the Halifax Reward account are taxable income and should be reported accordingly.

How Do You File Tax Returns For Halifax Rewards Payments?

To file a tax return for the annual payment received from your Halifax Rewards Account, follow these steps:

• Calculate the taxable amount from the annual payment received during the tax year with ease.
• Declare the annual payment as “Other Income” or “Additional Income” on your tax return form.
• Enter the taxable amount of the annual payment in the appropriate field in the designated section for reporting other income.
• Determine your applicable tax rate based on your overall income and tax bracket, and calculate the tax owed on the taxable amount from the annual payment using the appropriate tax rate.
• Proceed with completing the remaining sections of the tax return form, ensuring that all information is accurate.
• Thoroughly review the tax return for accuracy, sign it, and submit it to HM Revenue and Customs (HMRC) before the tax return deadline securely.

It is important to remember that, you may need to consult with a tax professional and/or refer to official guidelines provided by HMRC to ensure compliance with all tax obligations based on your individual circumstances.

Are There Any Tips For Managing Taxes On Bank Account Rewards?

Yes, here are some tips for managing taxes on bank account rewards:

• It is essential to keep track of the rewards you receive from your bank accounts, including the reward amount, date received, and type of reward. This information will come in handy when filing your taxes. 
• You should understand the tax implications of your rewards as not all bank account rewards are taxed in the same way. Understanding the tax implications of your rewards will enable you to report them correctly on your taxes. 
• If your rewards are taxable, make sure to include them in your tax return income. Non-residents of the UK may also need to pay taxes on their rewards. 
• If you believe you have overpaid taxes on your rewards, you can claim the excess back by filing a self-assessment tax return. Simply complete form SA100 and send it to HM Revenue & Customs.

Conclusion:

In conclusion, the cash-back payments received through the Reward Current Account of Halifax are taxable and should be added to your tax returns. The amount of tax that is due on such payments will depend on the account holder’s cumulative income and the tax band applied to their earnings.

References:

Savings and tax

Bank with Barclays, Halifax or Co-op? You may need to pay tax on your rewards

Halifax Reward account review: Is it any good? – Be Clever With Your Cash