Best bank accounts for cashback

Provider	Account name		Max Monthly cashback	Monthly fee
Barclays More info	Blue Rewards	65%	£7	£4
Chase More info	Chase	–	1% on debit card spending for a year	Free
The Co-operative Bank More info	Everyday Rewards	70%	£2.20	Free
Danske Bank More info	Reward	–	£7	£2
Halifax More info	Reward	67%	£5 or monthly reward benefit e.g. free Vue ticket	£3 (free if you pay in £1,500/mth)
NatWest More info	Reward	67%	£5	£2
Royal Bank of Scotland More info	Reward	56 %	£5	£2
Santander More info	123 123 Lite	66%	1% – 3% on bills	£4 (123) £2 (123 Lite)
TSB More info	Spend & Save	59%	£5 for first six months	Free
TSB More info	Spend & Save Plus	59%	£5	£3

Barclays Blue Rewards in detail

Barclays Blue Rewards scheme can be added to all accounts except Basic, Young Person’s, BarclayPlus, foreign currency accounts, Wealth and Business.

Once you’ve signed up, you’ll only earn Blue Rewards if you pay in at least £800 and pay the monthly £4 fee (taken from your nominated account on the second working day of each month).

The headline offer is cash for setting up monthly direct debits – you can earn £7 a month for two direct debits (£3.50 each).

But, the more products you hold with Barclays, the more cashback you will earn:

• £5 a month for a Barclays mortgage
• £5 a month for life insurance with critical illness cover (£1.50 for standard life insurance)
• £1 a month for a personal loan
• 3% when you take out or renew home insurance.

Members can also open a ‘Barclays Blue Rewards Saver’ which pays 0.15% in any month you don’t make a withdrawal (falling to 0.01% if you make one or more withdrawals).

Santander 123 in detail

Both the Santander 123 account and the 123 Lite account pay up to 3% cashback on selected household bills, capped at £5 per cashback tier each month:

• 1% cashback on mobile and home phone bills, broadband and paid-for TV packages and the first £1,000 you pay towards a Santander residential mortgage.
• 2% cashback on gas and electricity bills, Santander home insurance and Santander life protection.
• 3% cashback on water bills.

Spending on your Santander debit card can also bag you additional cashback of up to 15% at a range of major retailers.

You’ll need to pay in £500 every month to earn these benefits and have at least two active direct debits. Lite customers must also log onto online or mobile banking at least once every three months.

The full 123 account costs £4 a month but it pays 0.3% interest on credit balances (compare high interest current accounts here).

NatWest and RBS Reward in detail

Previously, the NatWest and RBS Reward accounts paid 2% cashback on household bills paid by direct debit, but this perk was scrapped in February 2020.

Now, you can earn £4 for paying out two or more direct debits (valued at £2 minimum), plus £1 for logging into the mobile banking app each month. Both banks offer 1% cashback on spending at certain retailers as well.

You must pay £1,250 into the NatWest or RBS Reward current account each month to qualify for the perks.

Your ‘Rewards’ become available to spend once you’ve earned the equivalent of £5 or more.

At this point you can choose to either: bank it so that the money is transferred to your current account; trade it for gift cards and shopping codes to use at selected retailers; or donate it to a participating charity.

Maximising current account rewards

Many providers ask you pay in a minimum amount each month or maintain a certain number of direct debits to be eligible for current account rewards.

In some cases, you may need to hold other products with that provider, such as a mortgage, personal loan, or insurance, to benefit fully.

Compare rates to the rest of the market as you might be better off holding these products with other providers, even with the extra cashback.

Watch out for fees being increased, or benefits being chopped and changed. If they are, take the time to reassess whether the account is still working for you and consider switching if the benefits no longer stack up.

Are current account rewards taxable?

Some rewards are considered taxable by HM Revenue & Customs (HMRC) and some aren’t. It all comes down to how HMRC categorises rewards for tax purposes. Broadly, there are three possibilities:

• Annual payments: taxable and paid with basic-rate tax deducted at source
• Miscellaneous income: taxable but paid without tax deducted
• Neither annual payments nor miscellaneous income: not taxable and paid without tax deducted

HMRC explained to Which? that it would only expect current-account rewards to be annual payments if they continue for more than a year and the customer doesn’t pay a fee for holding the account.

Cashback on household bills, offered by the likes of Santander and NatWest, are essentially a discount on goods or services, not income – so there is no tax to pay.

For annual payments, you don’t owe any extra tax if you are a basic-rate taxpayer. If you pay tax at higher or additional rates you should pay the additional amount over and above the tax deducted at source if you receive rewards with basic-rate tax deducted.

If you are a non-taxpayer, you can reclaim any tax deducted by using the R40 form or on your self-assessment tax return if you complete returns.

Should I open a joint account for cashback?

Unlike interest-paying accounts, there’s little to be gained by opening multiple cashback current accounts, as banks tend to restrict benefits.

For example, the Barclays Blue Rewards scheme pays £7 cashback a month for maintaining two direct debits, plus varying levels of cashback for holding extra Barclays products, but customers can only hold one Rewards Wallet each.

Similarly, you can only nominate one account to receive Co-operative Bank Everyday Rewards.