Day: December 29, 2019

My Bank gives Rewards – how are they taxed?

It seems crazy to me that banks give rewards and charges at the same time, wouldn’t lower charges be better?

The rules for Interest are covered by https://www.gov.uk/apply-tax-free-interest-on-savings

These rules include the Personal Savings Allowance and means (provided you aren’t an additional rate tax payer) you could get up to £1000 tax free (£500 for higher rate tax payers).

The problem with rewards is that it depends on what they are as to how they are treated

  1. If the reward is interest (calculated as a rate on the balance) then it should be paid gross, it will be savings income and eligible for the Personal Savings Allowance (PSA)
  2. If its a reward for depositing a certain amount each month or other activity then its not savings income and the bank should have deducted 20% before paying it under the annual payment rules. You will need to report this on your Self Assessment or R40 to reclaim the tax, this income is not with the PSA rules.
  3. If there is reward not related to the balance and there are also charges and fees on the account, it won’t meet the criteria for an annual payment and the bank won’t deduct 20% at source. You will need to declare it as ‘Miscellaneous  Income’ on your self assessment return

steve@bicknells.net

 

Are you taxed if you generate surplus power?

There are special rules for the domestic generation of surplus power – BIM40520

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40520

Specific receipts: domestic microgeneration: Income Tax exemption for domestic microgeneration

S782A Income Tax (Trading and Other Income) Act 2005

With effect from tax year 2007-08 there is an exemption from Income Tax for an individual’s income from the sale of electricity generated by a microgeneration system where:
1. the system is installed at or near domestic premises occupied by the individual, and
2. the individual intends that the amount of electricity generated by the microgeneration system will not significantly exceed the amount of electricity consumed in those premises.

For the purpose of this exemption ‘domestic premises’ means premises used wholly or mainly as a separate private dwelling.

A ‘microgeneration system’ is defined in S4 Climate Change and Sustainable Energy Act 2006.

This exemption is aimed at domestic microgeneration which is primarily intended to match the generator’s own home consumption needs. The term ‘significantly exceed’ in (b) above is not defined in Section 782A and should be considered by reference to the particular circumstances. However, in general, a householder who does not intend to generate an amount of electricity more than 20% in excess of their own domestic needs is unlikely to be regarded as intending to significantly exceed the amount of electricity consumed in their own premises.

No income tax will therefore arise on feed-in tariffs received by an individual from domestic microgeneration where the above conditions are met.

The exemption may apply where an individual installs a microgeneration system at a property which is not the individual’s main residence provided that the other domestic property is used by the individual, wholly or mainly, as a separate private dwelling and the other conditions are met.

steve@bicknells.net