Do I need to declare my loyalty bonus on my tax return?
Important - the information below isn’t personal advice. The information provided is correct as at 6 April 2020 but tax rules can change and depend on your personal circumstances. If you’re unsure at all you should seek advice from a tax specialist.
Have you received loyalty bonus in your Fund and Share Account (as opposed to your ISA, LISA, or SIPP account)?
Yes – go to question 2.
No – no action required. Loyalty Bonus received in the SIPP, LISA or ISA does not need to be declared to HMRC.
Do you pay income tax?
Yes – go to question 3.
No – HL has to deduct tax at the basic rate on loyalty bonus paid to the Fund and Share Account of UK individuals, but if you do not pay income tax and do not complete a self-assessment income tax return, you can reclaim the tax suffered from HMRC by filling in the R40 form, boxes 7.4, 7.5 and entering “Annual Payment” into box 7.6.
Do you pay income tax above the basic rate?
Yes – go to question 4.
No – HL already withholds tax at the basic rate and pays this to HMRC, therefore you don’t need to take any further action unless the receipt of the Loyalty Bonuses increases your overall income above the higher rate tax threshold (in which case, go to question 4). N.B. Loyalty bonuses received by overseas investors, companies and charities are not required to be paid with the deduction of tax, therefore please let us know if you think any of these circumstances apply to your account.
Ignoring your loyalty bonus receipts for the moment, are you required to fill in a self-assessment income tax return for any other reason?
Yes – your Fund and Share Account loyalty bonus gross income is a ‘taxable annual payment’ to be entered at box 17 of the SA100 tax return, and any tax on this withheld by HL at box 19. (If HMRC send you the short tax return, SA200, instead, these amounts should be entered at boxes 7.1 and 7.2 respectively.)
No – go to question 5.
Is your loyalty bonus gross income more than £2,500?
Yes – notify HMRC that you have untaxed other income (‘taxable annual payment’) of more than £2,500 and are therefore required to complete a self-assessment tax return. Include your Fund and Share Account loyalty bonus gross income at box 17 of the SA100 tax return, and any tax on this withheld by HL at box 19. (If HMRC send you the short tax return, SA200, instead, these amounts should be entered at boxes 7.1 and 7.2 respectively.)
No – you need to let HMRC know about your Fund and Share Account loyalty bonus income, which is a ‘taxable annual payment’, either via your personal tax account (www.gov.uk/check-income-tax-current-year), or by telephone on 0300 200 3300. Remember that HL will have already withheld tax at the basic rate. HMRC will advise you how any higher rate income tax due will be collected. We would expect that in the majority of cases a self-assessment tax return will not be required.