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Cashback award on Credit Card

  • Fellow
  • Practice Licence
  • 78 posts
  • # 115139

Hi

 

Is income tax due on a cashback received from use of a credit card?

 

Any advice much appreciated.

 

Sue

  • Member
  • 12 posts
  • # 115144

Hi Sue

Generally cashback payments from credit cards are not taxable, HMRC stipulate that if it is taxable then the four following conditions must be met:

  1. It must be under a legal obligation
  2. The obligation to make payments must extend for more than a year
  3. It must be income, not capital, in the hands of the recipient
  4. It must represent pure income profit to the recipient (SAIM8030)

They then give an example of someone with a cashback credit card shown below:

William signs up for a credit card offering a ‘cashback’ feature. Twice a year, the issuer credits to the card an amount equal to 1% of the payments William has made in the previous 6 months. Such credits are not annual payments. Each payment is contingent on his having charged amounts to the credit card in the previous period. In essence, each payment represents a one-off rebate of amounts that William has paid to the card issuer. Any future cashback received will be dependent on the cardholder making more purchases with the card and no further cashback will be received if there are no future card transactions.

So it is probably safe to assume they are not taxable

Hope that helps

 

 

  • Fellow
  • Practice Licence
  • 78 posts
  • # 115145

Many thanks.  That is very helpful and clear.

 

Regards

 

Sue

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