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Best bank accounts for cashback

If you want more from your bank, take a look at our table showing the best current accounts for cashback and other rewards.

In this article
Best current accounts for cash rewards Barclays Blue Rewards in detail Santander 123 in detail NatWest and RBS Reward in detail
Maximising current account rewards Do I need to pay tax on cashback? Are current account rewards taxable? Should I open a joint account for cashback?

Best current accounts for cash rewards

Many banks and building societies are offering cashback on monthly bills and loyalty rewards as an incentive to open or retain an account. We show the best offers in this table.

If you’re looking for a bank account with extra benefits such as travel insurance or car breakdown cover, see our online tables to compare the best – and worst – packaged bank accounts.

Provider Account
name
undefined

 

Monthly
cashback
Extra benefits Monthly
fee
undefinedBarclays

 

More info

To earn £7 a month, you need to pay out two direct debits, pay in £800 and cover the £3 Blue Rewards fee.

Blue
Rewards
67% £7

Switch by 29 June 2018 to
earn double rewards for a year.
Earn £5 a month for holding a
Barclays mortgage, and £5 for
holding Barclays insurance
roducts; up to 5% cashback
on shopping. 

£3

Recommended provider

undefinedThe Co-operative Bank

 

More info

£4/mth if you pay in £800, pay out four direct debits, opt for paperless statements, log in to online/mobile banking, and stay within your overdraft limit. Plus, 5p per debit card transaction up to a max £1.50/mth.

Everyday
Rewards
71% £5.50 None £0
undefinedDanske Bank

 

More info

£7/mth, if you pay in £1,200 and pay out three direct debits (can be opened online but branches available in Northern Ireland only).

Reward 69% £7 £100 interest-free overdraft
and fee-free arranged overdraft.
£2

undefined

Halifax

 

More info

£3/mth if you pay in £750, stay in credit and pay out two direct debits. New customers earn £75 for switching.

Reward 66% £3 New customers earn £75
for switching.
£0

Recommended provider

undefinedM&S Bank

 

More info

New customers only: £5/mth added to your M&S gift card if you pay in £1,000/mth and keep two direct debits active (for first 12 months only).

Current
Account
71% £5 New customers get a £125
M&S gift card for switching.
£0
undefinedNatWest

 

More info

2% cashback on up to seven household bills paid by direct debit if you pay in £1,500 every month.

Reward 66% 2%
on bills = 
£6.84
1% cashback on shopping.
Fee-free debit card spending
abroad until 31 August 2018.
£2
undefinedRoyal Bank of Scotland

 

More info

2% cashback on up to seven household bills paid by direct debit if you pay in £1,500 every month.

Reward 60% 2%
on bills = 
£6.84
£100 for switching by 6 July
2018. 1% cashback on shopping.
Fee-free debit card spending
abroad until 31 August 2018.
£2
undefinedSantander

 

More info

1-3% tiered cashback paid on household bills paid by direct debit as long as you pay in £500, pay out two direct debits and log in to online or mobile banking at least once every three months. The full Santander 123 account also pays 1.5% interest on up to £20,000, for a higher monthly account fee of £5.

123
Lite
65% 1% - 3% 
on bills = 
£6.84
1% cashback on Santander
mortgage (worth max £10/mth);
2% on Santander home
insurance; up to 15% on shopping.    
£1

 

Table last updated on 27 June 2018.

Cashback scenario for banks paying a percentage of cashback based on average monthly household bills of £33 (water), £94 (energy), £40 (mobile phone/data), £29 (landline/broadband), £18 (TV package), and £128 (council tax).

Which? Customer Score: Which?'s rating for customer satisfaction, based on feedback from real customers. The score is made up of a customer's overall satisfaction with the brand, and how likely they are to recommend that brand to a friend. We surveyed 5,023 members of the general public in March 2018.

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.

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

But, the more products you hold with Barclays, the more cashback you will earn, including £5 per month for a Barclays mortgage, £5 for life insurance, £3 per month for home insurance and £1 per month for a personal loan. 

You can also earn an additional 1% cashback at more than 150 retailers when shopping through online banking or using the Barclays mobile banking app.

Once you’ve signed up, you’ll earn Blue Rewards if you pay in at least £800 and pay the monthly £3 fee (taken from your nominated account on the second working day of each month).

Santander 123 in detail

Both the Santander 123 account and the 123 Lite account pay up to 3% cashback on selected household bills:

  • 1% cashback on water bills, council tax 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 mobile and home phone bills, broadband and paid-for TV packages. 

The full account also pays interest on credit balances, at a rate of 1.5% on up to £20,000 - but it comes with a fee of £5 per month. 

If you don't want to use the account for savings, the Lite account is a good option as you get the cashback on bills for only £1 per month (but no credit interest). 

To be eligible, you'll need to pay in at least £500 into your account every month and have two active direct debits set-up. 

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

NatWest and RBS Reward in detail

Both NatWest and Royal Bank of Scotland (RBS) offer the Reward account for £2 monthly fee, which pays 2% cashback on household bills paid by direct debit.

Instead of tiered cashback, as with Santander, you earn 2% cashback on council tax, gas, electricity, water, home phone, mobile, TV and broadband.

The minimum pay-in is on the high side at £1,500 per month. 

You can cash in Rewards once you reach £5 - taking it as cash, shopping vouchers, or a donation to one of 10 charities. 

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 may 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.

Do I need to pay tax on cashback?

Under the new personal savings allowance (PSA), basic-rate taxpayers can earn up to £1,000 in savings income tax-free, while higher-rate taxpayers get a £500 allowance.

The PSA applies to all types of savings income, including interest paid on bank and building society current accounts. Since 6 April 2016, banks and building societies have stopped deducting income tax from interest paid on both traditional savings accounts and current account.

It was designed to simplify the system, but it’s managed to create a fair amount of confusion – particularly when it comes to current-account rewards.

Current-account rewards are paid as an incentive to open or retain an account – not as a return on the money you deposit into the account. You aren’t earning interest, or any other form of savings income, so this money is not covered by the PSA.  

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 the taxman 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 does not 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.

Do I owe tax from my bank account?

Both Halifax and The Co-operative Bank offer rewards that fall into the ‘annual payments’ category, which means they deduct basic-rate tax of 20% before paying rewards.

The gross monthly reward for the Halifax Reward account is £6.25, but you receive a net reward of £5. The gross monthly reward for the Co-op Everyday Rewards account is £5, but you receive a net reward of £4.

You don’t owe any extra tax if you are a basic-rate taxpayer.

Previously, Barclays Blue Rewards customers earning the £7-per-month Loyalty Reward were told to declare this to HMRC, via self-assessment, or by getting a new tax code. This reward was deemed to be a ‘miscellaneous payment’, because there is a £3 monthly fee.

In December 2016, Barclays reclassified this perk as cashback – to be precise, you earn £3.50 cashback monthly for your first two direct debit payments – to ensure that it is no longer subject to tax. 

All other Blue Rewards current account benefits have never been subject to income tax as these are also cashback deals for holding specific products (mortgage, insurance, loans).

What if I’m a higher-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.

What if I’m not a taxpayer?

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-op Everyday Rewards (up to £5.50 cashback every month).

And, while NatWest Reward joint account holders can earn cashback for spending at participating retailers using their individual debit cards, only one person can earn 2% cashback on up to seven household bills.