Nationwide Building Society customers are seeking urgent clarification on how a special £100 bonus payment will be taxed, after it emerged the society is obliged to report customer details to HM Revenue & Customs (HMRC).
What is the Nationwide Fairer Share Payment?
The payment in question is the Nationwide Fairer Share Payment, a one-off £100 bonus distributed to eligible, long-standing members. To qualify, members must hold both a Nationwide current account and a qualifying savings product or mortgage with the society.
The scheme is designed to reward deeper engagement with the mutual. However, the tax treatment of the windfall has sparked confusion and concern among recipients, prompting one customer to write to The Telegraph for expert advice.
Tax Confusion: Interest vs. Dividend
The core of the issue lies in how HMRC categorises the payment. The customer, who has used up their £1,000 personal savings allowance, explained that Nationwide had treated the £100 as a distribution of profits, which they believed should be classed as a dividend.
If it were a dividend, it would potentially fall within the £500 dividend allowance and be taxed at a lower rate of 8.75%. However, HMRC rules stipulate it must be treated as interest, meaning it was taxed at 20% in their case.
Tax expert Mike Warburton, formerly a tax director at Grant Thornton, clarified the situation. "The short answer to your question is that HMRC is correct to show it as interest," he stated, highlighting the crucial distinction that Nationwide is a building society, not a bank.
Why Building Society Rules Are Different
Mr Warburton pointed to specific HMRC regulations that govern mutual societies like Nationwide. The rules state: "Any sum paid by way of dividend, bonus, interest or otherwise, that is paid to a shareholder in a registered society, and is paid by reference to the shareholder’s holding in the society’s capital... are treated as interest."
This means that even though the payment is called a bonus or profit share, for a building society member it is legally considered interest for tax purposes. If Nationwide were a bank, the same payment would likely be taxed as a dividend.
Critically, Warburton confirmed that Nationwide is obligated to report the details of all these payments to HMRC, ensuring the tax is applied correctly according to their classification.
The revelation means members who have already utilised their personal savings allowance need to be aware that the £100 payment could affect their tax liability, treated as interest income in the 2025/26 tax year.
