Declare "interest" on energy supplier account balances?

[Revisitph]

My gas and electricity provider gives me a 5% interest "reward" for positive balances of up to £1000 so I tend to keep my balance close to that, viewing it as an ultra low risk company bond with a 5% coupon. £50 p.a. is not much but the rate is far better than most deposit accounts - one would need £10k in a 0.5% interest account to equal it before tax. I assume that in theory I should declare it to HMRC but expect that a) their scraping tech is not up to finding it, nor b) that there is a sufficient number of people benefiting from the interest to make it worth their while hunting us down.

An imperfect analogy is an offset mortgage (assuming the headline interest rate, charges etc are the same as a non-offset one), which works because one does not pay a) interest on the debt against which the positive balances are offset and b) you don't pay tax on interest which you do not receive in accounts which are offset against the mortgage. The analogy is imperfect because with an offset mortgage one is reducing a debt and interest charge whereas with the energy company you get interest on a loan you make them, albeit the interest is not actually paid out to you.

The sums of money (and potential penalties) are small and I am sure that one should declare "income" from whatever source, but, to one of a nerdy nature, an interesting theoretical question.

[Simpo Two]

There's an annual allowance of £1,000 for interest, so unless you've used all that, trouser it.

PS Which provider? Hopefully you're not paying £50 a year extra on the tariff...!

[Revisitph]

That's a point; tapering meant that I had no personal savings allowance last year but now that I've stopped work I will be allowed £500, but think that that will be used up by conventional interest. I suppose I should declare it.

My supplier has been relatively competitive, but it is very difficult to know as the plethora of suppliers and tariffs makes comparison tricky. Any interest on balances will be dwarfed by a surge in energy prices when our contracts come up for renewal given the current wholesale price of gas, low reserves, restricted supply for geopolitical reasons and because of catch-up maintenance delayed last year by the pandemic, increased demand plus an exceptionally calm summer across N Europe which has cut wind turbine output, meaning more gas being diverted to provide electricity and even mothballed coal power stations have been brought back into use in recent days.

[NickCQ]

It is an interesting question but I suspect the payment is not regarded as "interest" by HMRC but as a discount for prepaying your bill. The fact that the benefit is only redeemed in kind rather than in cash is probably important. Add to that the fact that the utility company almost certainly doesn't have a banking license so isn't properly regulated to take retail deposits and pay interest on them.

[NickCQ]

BTW, if the supplier is OVO (which appears to offer this deal based on a quick Google), bear in mind that it's a business that lost £100 mm in 2019, has £390 mm of debt and £50 mm of negative balance sheet equity. Owned by an individual with some private equity money in there.

There's a reason they have to finance themselves so expensively... I would not lend them anything that you can't afford to lose. A couple of energy suppliers go bust every year as margins are tiny and they have to spend huge amounts in marketing / customer acquisition to stay afloat.