Last updated: 14 October 2026
Do you need to pay tax on a bonus from a building society?
Usually not. A member bonus paid by a mutual building society such as Nationwide, for example its Fairer Share payment, is generally treated as savings income for tax purposes when paid into a savings or current account. Most people pay no tax on it because it falls within the Personal Savings Allowance of £1,000 for basic rate taxpayers or £500 for higher rate taxpayers, or the £5,000 starting rate for savings. Additional rate taxpayers have no allowance, so they pay tax on it. Payments into an ISA are tax-free.
How building society payments are taxed
| Payment | Tax treatment |
| Member bonus paid to a savings or current account | Savings income, covered by PSA in most cases |
| Bonus paid into a cash ISA | Tax-free |
| Switching incentive (cash for moving account) | Usually tax-free, as it’s not interest |
| Windfall shares on demutualisation | CGT may apply when sold |
| Interest on savings | Savings income |
Personal Savings Allowance 2026/27
| Income tax band | Allowance |
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £0 |
If your non-savings income is below £17,570, up to £5,000 of savings income may also be covered by the starting rate for savings.
Example
Kate is a higher rate taxpayer with £350 of savings interest in 2026/27. She receives a £100 member bonus into her current account. Her total savings income is £450, which is within her £500 allowance, so she pays no tax. Her husband, an additional rate taxpayer, receives the same bonus and pays £45 tax at 45%.
Do you need to report it?
Banks and building societies send interest details to HMRC, which adjusts your tax code or sends a Simple Assessment if tax is due. If you file Self Assessment, include taxable bonuses with your interest. You don’t need to report amounts covered by your allowance unless you’re already filing.
Rates from April 2027
From 6 April 2027, savings income rates rise by 2 percentage points to 22%, 42% and 47%, so savings above your allowance will cost more in tax.
Keeping savings tax-free
- Use your £20,000 ISA allowance
- Move savings to a spouse with unused allowance
- Consider Premium Bonds, where prizes are tax-free
Common mistakes
- Assuming every bonus must be reported even when covered
- Ignoring a Simple Assessment letter
- Forgetting that interest on fixed-rate bonds is taxed when it becomes available
Records to keep
Keep the society’s notice of the bonus and annual interest statements.
Joint accounts
If the bonus is paid into a joint account, it’s normally split equally between account holders for tax. Each person sets their share against their own Personal Savings Allowance, which often means neither pays tax. Married couples can declare unequal shares if the money is owned unequally.
Frequently asked questions
Is a switching bonus taxable?
Usually not, as it’s a gift-type incentive.
Does a bonus affect my tax code?
Possibly, if HMRC estimates your interest.
Is the bonus counted for Child Benefit charge?
Yes, savings income forms part of adjusted net income.
Are cashback rewards taxable?
Usually not for personal accounts.
Related: tax deducted from interest, ISA tax implications and interest from a closed account.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with savings and bonus income. See our tax refund accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
