You've earned £600 from bank switching this year, £135 from stoozing, and £97 from regular savers. Do you owe HMRC anything?
The answer depends on what type of income each payment counts as — and most people get this wrong. Here's the definitive breakdown.
Bank Switch Bonuses: Are They Taxed?
It depends on the type of bonus. HMRC treats different switch incentives differently:
Cash bonuses paid into your account
Most bank switch bonuses (e.g., "Switch to us and get £175") are paid as cash into your new current account. HMRC classifies these as miscellaneous income, not savings interest.
This means:
- They do not count against your Personal Savings Allowance (PSA)
- They are subject to income tax
- But they fall under the trading allowance — the first £1,000 of miscellaneous income per tax year is tax-free
For most bank switchers, this is great news. If your total switch bonuses are under £1,000 in a tax year, you owe nothing. At 4 switches averaging £150 each, that's £600 — well within the allowance.
Interest rate bonuses
Some banks offer enhanced interest rates instead of cash (e.g., "5% AER on balances up to £5,000 for 12 months"). This interest is treated as savings income and counts towards your PSA.
Vouchers and non-cash incentives
Gift cards, vouchers, or non-cash rewards are technically taxable as miscellaneous income but still fall under the £1,000 trading allowance.
The Personal Savings Allowance (PSA)
The PSA covers interest from savings accounts, not switch bonuses. Here's what you get:
| Tax Band | PSA Amount |
|---|---|
| Basic rate (20%) | £1,000 |
| Higher rate (40%) | £500 |
| Additional rate (45%) | £0 |
What counts towards your PSA:
- Interest from savings accounts (including regular savers)
- Interest from stoozing (money on deposit from 0% cards)
- Interest from current account balances
- Interest from peer-to-peer lending
- Corporate bond interest
What doesn't count towards your PSA:
- Cash switch bonuses (miscellaneous income, covered by trading allowance)
- ISA interest (always tax-free)
- Premium Bond prizes (always tax-free)
Stoozing Interest: How It's Taxed
When you stooze — borrow on a 0% card and deposit into a savings account — the interest earned is savings income and counts towards your PSA.
Example:
- £5,000 stooze into a 4.5% savings account
- Annual interest: £225
- This uses £225 of your PSA
If you're a basic-rate taxpayer, you've still got £775 of PSA remaining for other savings interest. If you're a higher-rate taxpayer with only £500 PSA, you need to be more careful about your total interest across all accounts.
Regular Saver Interest: How It's Taxed
Regular saver interest is savings income — same as any other savings account. It counts towards your PSA.
The good news: the actual interest earned from regular savers is usually smaller than the headline rate suggests, because you're building the balance gradually over 12 months. A regular saver with a 7% headline rate on £250/month generates roughly £114 of actual interest — not £210.
Read our regular saver rates explainer for the full maths.
Worked Example: A Typical Stoozer's Tax Position
Let's say you're a basic-rate taxpayer and in the 2025/26 tax year you earned:
| Source | Amount | Tax Treatment |
|---|---|---|
| 3 bank switch bonuses | £450 | Miscellaneous income (trading allowance) |
| Stoozing interest (£5k × 4.5%) | £225 | Savings income (PSA) |
| Regular saver interest | £114 | Savings income (PSA) |
| Easy access savings interest | £380 | Savings income (PSA) |
| Total savings interest | £719 | Within £1,000 PSA |
| Total switch bonuses | £450 | Within £1,000 trading allowance |
Tax owed: £0. Both allowances have headroom.
When You Might Owe Tax
You'll owe tax in two scenarios:
1. Switch bonuses exceed £1,000/year
If you switch aggressively — say 8 switches at £175 each = £1,400 — the £400 above the trading allowance is taxable at your marginal rate.
- Basic rate: £400 × 20% = £80 tax
- Higher rate: £400 × 40% = £160 tax
Tip: You can choose to either use the £1,000 trading allowance OR deduct actual expenses (there usually aren't any for bank switching, so the allowance is better).
2. Total savings interest exceeds your PSA
If you have substantial savings across multiple accounts, your total interest may exceed your PSA:
- Basic rate: Over £1,000 of interest → 20% tax on the excess
- Higher rate: Over £500 of interest → 40% tax on the excess
- Additional rate: All interest taxed at 45%
Tip: If you're approaching your PSA limit, consider Premium Bonds for the overflow — their returns are tax-free.
Do You Need to File a Self Assessment?
Usually no. Banks report interest to HMRC automatically, and HMRC adjusts your tax code to collect any tax owed.
You DO need to self-assess if:
- Your untaxed income (including switch bonuses) exceeds £1,000 AND you haven't opted for the trading allowance
- You're already in self-assessment for other reasons
- HMRC writes to you requesting a return
You DON'T need to self-assess if:
- Switch bonuses are under £1,000 (trading allowance covers them)
- Savings interest is within your PSA
- You're employed and HMRC adjusts your tax code
Strategies to Minimise Tax
- Spread switches across tax years — if you're near £1,000 in bonuses, delay a switch to April
- Use your ISA allowance — £20,000/year of tax-free savings
- Premium Bonds for PSA overflow — tax-free returns when you've used your PSA
- Married couple? Both of you switch — each gets their own £1,000 trading allowance and PSA
- Track everything — StoozeMax logs your earnings by tax year so you know exactly where you stand
The Bottom Line
For most people doing 3-5 bank switches a year alongside some stoozing and regular savers:
- Switch bonuses: tax-free under the £1,000 trading allowance
- Savings interest: tax-free under the PSA (£1,000 for basic rate, £500 for higher rate)
- Total tax bill: usually £0
The tax system is actually quite generous for this kind of activity. Just keep track of your numbers — which is exactly what StoozeMax does for you.
Related reading: Stoozing vs Premium Bonds vs Savings Accounts | £1,000/Year from Banking: Month-by-Month Plan