Halifax Reward Account

[ravisb_2014]

Hi All,

I have a question regarding extra amount of £60 per year credited to my current account.
Last year around September 2015, I converted my Halifax current account to Reward Current account. After conversion, Bank started crediting £5 every month to my account. Last week, I got a statement from halifax stating that the following statement will help you in completing 2016 tax return for the year ending on 5th April, 2016.

TAX YEAR 6 April 2015 - 5 April 2016

Reward and Tax Details

Gross Reward (before tax) £37.50
Tax Deducted £7.50
-----------------------------------------------------------------
Net Reward Paid £30.00

My question is :
1. As tax is already deducted, so I don't need to pay any money for this reward.
2. It's a minimal amount. Will it be considered as extra income by home office ?
3. As I am a permanent employee and all tax related things are taken care by my employer. Do I need to declared this income ?
4. Do I need to worry about this income when time comes for ILR ?
5. Do you suggest to cancel this reward asap to be on safer side ?

Kindly suggest. Thanks for your help.

[CR001]

You are over thinking this.

1. No

2. No

3. Probably not

4. No

5. Up to you, but should have no effect on your immigration applications.

[ravisb_2014]

Thanks CR001 for your quick response.
Yes, You are correct - I might be over thinking because halifax letter states that this summary payment details will help completing the 2016 Tax return, which was already done by employer. As you mentioned there will be no effect on immigration application, I think it will be alright.

[moonlight55]

@ravi: Do you file IT returns in UK? You may be aware that from Apr this year, banks will not deduct tax and pay you any interest as gross. The halifax reward is like interest each month. However small, it's recommended to include this additional income in your tax returns. You may have to pay few pounds tax on it. I understand the amount is small and could easily be ignored, but If I were you, I don't want to give any reason to HO to risk your ILR. I may be wrong and this may not be an issue afterall, but better to be safe. Ultimately, its our choice.

[ravisb_2014]

@moonlight, thanks for your reply.
Yes, my employer files my return in UK and I get P60.

My query is :
1. For 2016 Tax Return, it was already done by my employer. Halifax statement also says that they rewarded £37.50 (before tax) - £7.5 (tax deducted) = £30.00 (net reward paid).

From the statement, Halifax is actually credited £30.00 (£5 * 6 months) to my account last year and I was not rewarded £37.5 and later not debited £7.5 as it was already done by them. I came to know about this after receiving this letter last week. As I don't do my tax return myself (employer does on my behalf), how do i declare this amount? let me know the procedure please.

2. Secondly, you mentioned from April 2016, bank will not deduct tax. but halifax still credits £5 every month to my account. I presume tax is already deducted every month as the same amount was credited before April, 2016 as well and they might be providing similar statement next year at the same time.

3. As I don't want to risk my ILR, I am OK to cancel this reward or if required, I am ready to return the reward amount to halifax as you know this amount is not making any difference to my finance.

Thanks for your valuable suggestions. Your valuable suggestions are really appreciated.

[moonlight55]

I don't have this halifax account so can't comment on it. Find out by calling Halifax about the amount. If they say that this year the monthly amount (5 GBP) is including the interest and they will not deduct any interest on top of it, you should be okay. Atleast you will not owe anything. Otherwise, you have to file your tax return yourself to declare any additional income. Btw, P60 is issued before you file your returns (its not proof of IT return). You use the data from P60 while filing.

As in any income tax returns, any additional income needs to be declared whether you pay tax for it or not since some income are exempt from tax.

[ravisb_2014]

Thanks moonlight for clarifying this. Really appreciate your help.

[trueblue19]

Hello

I have the same reward account with Halifax, as well as a 123 account with Santander which pays interest of up to £600, before tax, per annum.

While doing my self assessment (SA) this year on HMRC website, I declared the amount of interest received, as well as any tax deducted on source by the bank. My usual NI and tax contributions were there on the P60 anyway.

After entering these details in SA, the calculator shows the extra tax I'm due to pay, basis the amount interest received. Suggest you do the same as well. Of course it doesnt have any adverse impact on your immigration history/future, but paying the right amount of tax, is a good practice, I suppose.

FYI, I'm a full-time employee on Tier-2, and not self employed.

[ravisb_2014]

Thanks trueblue19 for your response with detailed explanation. I really appreciate that.
I will follow the same procedure in HMRC website to declare the tax.

I presume I just need to declare the extra amount as halifax already paid the tax on my behalf stated in their statement.

One question -> while doing SA, do i need to mention £37.5 received before tax and tax deducted by bank £7.5 and final amount received is £30. In my case, I never received £37.5 in six months. Instead £30 in six months with taxable amount already deducted by bank. Kindly clarify the same. Your response will be highly appreciated.

[trueblue19]

Actually when you see the SA calculator, it will become all clear. It has an option to declare how much tax has already been paid on the accrued interest. So, ideally, in your case, you should not owe anything else since the bank has already deducted TOI (tax on interest). However, Please note that if you're in the higher tax band (40%), the tax you owe on the interest, will increase. So the SA calculator may end up showing you owe £X, even though the bank has deducted the tax upfront (but only on a 20% rate).

Also, here's an excerpt from moneysavingexpert, and it reads that Halifax actually, pays in £6.25 and not £5 every month, and deducts 20% tax on £6.25, so the £5 you get in your account, has already had tax deducted from it.

"The gross amount is £6.25. The net amount is £5. Higher rate taxpayers have an additional liability. Non-taxpayers can claim back the £1.25 from HMRC."

Hope this clarifies.

[ravi_ei]

Have a look at this link.

https://www.gov.uk/apply-tax-free-inter ... ax-you-pay

[trueblue19]

Yes, this is very relevant.

However, like I mentioned, for 40% band, one will owe tax. I have 2 santander accounts and a couple of reward accounts, and the interest amount received on savings, exceeds £500 (the allowance on higher tax band). SA will give a very clear picture.

[ravi_ei]

So overall, if you are in higher tax band and your interest on various accounts is not more than £500, then its not taxable. But if it is beyond £500, say £700 then on £200 you have to pay tax with 40% rate.

Regards
Ravi(not sb)

[trueblue19]

So overall, if you are in higher tax band and your interest on various accounts is not more than £500, then its not taxable. But if it is beyond £500, say £700 then on £200 you have to pay tax with 40% rate.

Regards
Ravi(not sb)

Correct.

[ravisb_2014]

Thanks Tureblue and ravi_ei.