Bank with Barclays, Halifax or Co-op? You may need to pay tax on your rewards

The Barclays Blue Rewards scheme, Halifax Reward account and The Co-op Bank's Everyday Rewards scheme all give you some form of monthly payment which is treated in the same way as savings interest – but with one exception.HM Revenue & Customs has confirmed these payments AREN'T covered by the new Personal Savings Allowance (PSA), a new scheme to reduce the tax you pay on savings interest which came into effect in April.

If you do owe tax, while HMRC says you won't have to fill in a tax return just because you receive these rewards, you may need to let the taxman know. Here we've a full account-by-account breakdown of how to tell if you're affected – and if you are, what you need to do.

Halifax Reward account – how you're affected

The Halifax Reward account pays an additional £5/month to customers who pay in £750/month, remain in credit and pay out at least two direct debits. This reward is subject to tax, as it's classified as an annual payment rather than savings interest.

The £5/month is paid with 20% income tax already deducted (the gross reward amount is £6.25/month), so here's how you're affected:

• If you're a non-taxpayer (you earn less than £11,000/year), you may have overpaid tax.

• If you're a basic-rate (20%) taxpayer, you don't need to do anything.

• If you're a higher-rate (40%) or additional rate (45%) taxpayer, you need to pay extra tax on your rewards.

Barclays Blue Rewards scheme – how you're affected

The Barclays Blue Rewards scheme is open to most Barclays current account holders (though not Cash Card, Young Person's, BarclayPlus, foreign currency, Wealth or Business accounts). It pays a loyalty reward of £7/month if you sign up to the scheme, pay the £3/month fee, pay in at least £800/month and have at least two direct debits going out of your account.

This reward's classed by HMRC as 'miscellaneous income' and isn't included in your PSA, so IS subject to income tax. But this isn't deducted automatically, which means:

• If you're a non-taxpayer, you don't need to do anything.

• If you're a taxpayer – whether basic-rate (20%), higher-rate (40%) or additional-rate (45%) – you may need to declare it.

You can also get additional rewards under the Blue Rewards scheme, including additional monthly payments for taking out other Barclays products. This includes up to £3/month for buildings, contents or combined home cover, and £5/month for taking out a residential mortgage. You can earn up to £180 a year if you receive the loyalty reward and both the additional rewards.

And then there's its SmartSpend cashback scheme, where you can earn an average of 4% cashback with firms including Boots, Gap, Waterstones, Toys R Us and more – and up to 7% on Expedia travel bookings.

Neither additional rewards or SmartSpend cashback are included in your PSA, but they aren't taxable – so you don't need to worry about telling the taxman about them.

Not all banking rewards are covered by the new Personal Savings Allowance

The Co-op Everyday Rewards scheme – how you're affected

The Co-operative Bank Everyday Rewards scheme pays an additional £4/month to customers who sign up to the scheme, pay in £800/mth, pay out at least four direct debits, receive paperless statements, log in to mobile or online banking at least once a month and stay within their overdraft limit. You'll need to have a Current Account, Current Account Plus, Privilege Account or Privilege Premier Account to join the scheme.

This reward is subject to tax, as it's classified as an annual payment rather than savings interest. The £4/mth is paid with 20% income tax already deducted (the gross reward amount is £5/month), so here's what you need to do:

• If you're a non-taxpayer (you earn less than £11,000/year), you may have overpaid tax.

• If you're a basic-rate (20%) taxpayer, you don't need to do anything.

• If you're a higher-rate (40%) or additional rate (45%) taxpayer, you need to pay extra tax on your rewards.

The Everyday Rewards scheme also offers an additional reward – if you meet all the requirements above you'll also get 5p per debit card transaction, up to a maximum of £1.50/month. However this element isn't taxable, so it's paid in full and you don't need to do anything.

What you need to do next

Once you've checked whether you're affected, here's what to do next.

• If you've overpaid tax on your rewards, you can reclaim it using HMRC's R40 form.

• If you've paid the right amount of tax, you don't need to do anything.

• If you think you've underpaid, you can call the HMRC tax helpline on 0300 200 3300 for advice. HMRC says nobody benefiting from these rewards will need to file a tax return just because they receive them. But if you ALREADY file self-assessment tax returns, HMRC says you should record your taxable rewards in your return "in the normal way."

  If you don't self-assess, you may already have tax deducted via your tax code but HMRC says it'll write to anyone who needs to take action on their rewards tax for the first time. These letters will set out how HMRC will collect tax due, either by tax code changes or "alternative methods" – though HMRC won't yet specify what these will be.

So how has this situation come about then?

Nothing's actually changed – these amounts have always been declarable by some customers. It's just that the introduction of PSA has caused some confusion.

PSA, which launched on 6 April this year, has lifted around 95% of UK adults out of paying tax on their savings interest. Under the PSA scheme, basic-rate (20%) taxpayers can earn £1,000 of interest tax-free, and higher-rate (40%) taxpayers get a £500 allowance (additional-rate (45%) taxpayers don't get a PSA). See our Personal Savings Allowance guide for more info.

While the PSA has simplified things if you just earn interest from your account, there are actually three kinds of benefits you can get from a bank account:

• Interest paid on the balance – as above, this is covered by the PSA, so if you're a basic-rate taxpayer and earn less than £1,000/year in interest, or a higher-rate taxpayer and earn less than £500/year, you don't have to pay anything.

• Monthly 'reward' payments direct into your account – these are usually taxed, as they're classed as 'annual payments' rather than savings interest. But the 'additional rewards' paid by Barclays Blue Rewards if you take out additional Barclays products are an exception. They're not covered by the PSA but not taxable either. Barclays says that's because they're classed as 'miscellaneous income, cashback or a discount.'

• Cashback – this one's simple – it isn't taxable.