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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 the table below, along with the latest switching offers.

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
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Monthly
cashback
Monthly
fee
Barclays

 

More info

To earn £7 a month, you need to pay out two direct debits, pay in £800 and cover the £4 Blue Rewards fee (was £3, increased on 1 July 2019). Additional cashback available if you own other Barclays products. 

Blue
Rewards
70% £7 £4

The 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
73% £5.50 n/a
Danske 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 66% £7 £2

Halifax

More info

£2/mth if you pay in £750, stay in credit and pay out two direct debits. From 1 July 2020, Halifax is ditching this offer and replacing it with 'Reward Extras' which lets you choose to be rewarded for spending (£5 if you spend £500+ on your debit card) or saving (£5 if you keep your balance at £5,000+). You will need to pay at least £1,500 into your account, up from £750. 

Reward 70% £2 n/a
NatWest

 

More info

As of 1 Feb 2020, you can earn £4 for paying out two or more direct debits plus £1 for logging into the mobile banking app each month. Also pays 1% cashback on spending at certain retailers. You can only apply for a Reward account if you can pay in £1,250 each calendar month to any eligible NatWest account (excludes Foundation, Basic or Mortgage). 

Reward 69% £5 £2
Royal Bank of Scotland

 

More info

As of 1 Feb 2020, you can earn £4 for paying out two or more direct debits plus £1 for logging into the mobile banking app each month. Also pays 1% cashback on spending at certain retailers. You can only apply for a Reward account if you can pay in £1,250 each calendar month to any eligible RBS account (excludes Foundation, Basic or Mortgage). 

Reward 62% £5 £2
Santander

 

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 pays 1.5% interest on up to £20,000 (1% from 5 May 2020), for a higher monthly account fee of £5. Both the full account and Lite version will cap cashback at £5 per cashback tier (so max £15 per month overall) from 5 May 2020. 

123

123 Lite

 

70% 1% - 3% on bills

£5 (123)

£1 (123 Lite)

 

Data correct as of April 2020.

Which? Customer Score: Our 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 4,216 members of the general public in September 2019. Our full table includes scores and star ratings for all banks. 

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 bank has announced that cashback will be capped at £5 per cashback tier (max £15 per month overall) from 5 May 2020 so this will significantly reduce the benefits for some households. 

The full account also pays interest on credit balances, at a rate of 1.5% on up to £20,000 for now, though this is falling to 1% from May. 

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

NatWest and Royal Bank of Scotland (RBS) have scrapped their cashback on bills offer on the Reward account and replaced it with a monthly £5 bonus. 

Instead of paying 2% cashback on household bills, as before, you can earn £4 for paying out two or more direct debits, plus £1 for logging into the mobile banking app each month.

Both banks continue to 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 (was £1,500). 

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 up for vouchers or tickets which you can 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 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. 

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