Nationwide Building Society members who have just received a £100 bonus under the Fairer Share scheme may need to consider the tax implications. The mutual has distributed the payment to over four million customers, but this could result in a tax bill from HMRC.
How the Fairer Share Payment Works
The Fairer Share programme sees Nationwide sharing its profits with members. There have been four payments of £100 each to date. To qualify for the latest payout, customers needed a Nationwide current account combined with either a savings account or a mortgage.
While the bonus is a welcome addition, Rachel Springall, finance expert at Moneyfactscompare.co.uk, warns: "It is treated as interest for UK income tax purposes. So, it will be reported to HMRC." This means the £100 will count towards your tax-free allowance for interest earnings.
Tax-Free Allowances and Potential Bills
Basic rate taxpayers can earn up to £1,000 in interest each tax year without paying tax. Higher rate taxpayers have a £500 allowance, while additional rate taxpayers get no allowance and must pay tax on all interest.
If you have to pay tax on the full £100, basic rate taxpayers would owe £20, higher rate taxpayers £40, and additional rate taxpayers £45.
Springall advises savers to check how the bonus affects their personal savings allowance (PSA). She notes that rising interest rates and fiscal drag mean more people are breaching their PSA.
ISAs as a Tax-Efficient Option
To shield cash from tax, savers can consider cash ISAs or stocks and shares ISAs. However, from April 2027, the annual cash ISA allowance will drop to £12,000, but remain at £20,000 for those aged 65 or over.
Upcoming Tax Rate Changes
From next year, tax rates on interest earnings will rise by two percentage points. Basic rate taxpayers will see their rate increase from 20% to 22%, higher rate from 40% to 42%, and additional rate from 45% to 47%.
Customers are urged to review their tax position and consider using their ISA allowances to avoid unexpected tax bills.
