Nationwide Building Society members who received the £100 Fairer Share Payment may be unaware of potential tax implications. Over four million customers have received the bonus, part of the mutual's profit-sharing scheme. However, HMRC treats the payment as interest for income tax purposes, meaning it could affect your tax-free allowance.
How the Fairer Share Payment Works
The Fairer Share scheme distributes profits to eligible members. To qualify, customers needed a Nationwide current account combined with a savings account or mortgage. There have been four £100 payments to date. While receiving the bonus is welcome, savers should be aware of the tax consequences.
Tax Implications of the £100 Payment
Rachel Springall, finance expert at Moneyfactscompare.co.uk, explained: "It is treated as interest for UK income tax purposes. So, it will be reported to HMRC." The £100 counts toward your personal savings allowance (PSA), which is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and zero for additional-rate taxpayers. If the payment pushes you over your PSA, you will owe tax on the excess at your marginal rate.
How Much Tax Could You Pay?
If you must pay tax on the full £100, basic-rate taxpayers owe £20, higher-rate owe £40, and additional-rate owe £45. With upcoming tax rate increases—basic rate to 22%, higher to 42%, and additional to 47%—the cost could rise.
Check Your Personal Savings Allowance
Springall urged savers to monitor their PSA, noting that rising interest rates and fiscal drag are causing more people to exceed their allowance. She recommended considering cash ISAs or stocks and shares ISAs to shield savings from tax. However, from April 2027, the annual cash ISA allowance will drop to £12,000 for most savers, while remaining at £20,000 for those aged 65 or over.
Upcoming Savings Tax Changes
Currently, you can deposit up to £20,000 per tax year into ISAs, with all interest and growth tax-free. Next year, only £12,000 of that allowance can go into cash ISAs, with the remaining £8,000 reserved for investment-based accounts. Additionally, tax rates on interest earnings will rise by two percentage points, affecting basic, higher, and additional-rate taxpayers.
