Skip to main content

HMRC to tax fund 'cashback'

HMRC is set to tax bonuses paid on funds within the industry, as supermarket and credit card cashback schemes could be next.

Fund investors face paying income tax on 'loyalty bonuses' from next week as the Revenue has decided that the payments are 'annual' and should therefore be taxed as income. The change is effective from the new tax year - which is next week on 6 April.

Hargreaves Lansdown, the largest payer of loyalty bonuses on funds in the UK, called it 'anti-competitive' and argued it set a 'worrying precedent' that could start to affect other forms of cashback, such as supermarket and credit card loyalty shcemes. HMRC dismissed this.

The new measures mean that the basix rate of tax (20 per cent) will be deducted from the bonuses at source and higher rate tax payers will need to declare and pay additional amounts on annual self-assessment forms.

Money withing ISA and Sipps (self-invested personal pensions) is tax-free and will not be affected.

What Investment magazine: SAVE 47%

Growth Company Investor: free trial