Is credit card cashback taxable in the UK?

Full answer

Cashback credit cards refund a small percentage of what you spend. For ordinary personal use, HMRC's long-standing view is that this is effectively a discount or rebate on your own purchases rather than income, so personal cashback is not taxable. You do not need to report it on a Self Assessment return and it does not use any allowance. The logic is that you are simply getting some of your own money back; there is no new income, just a reduction in the net cost of goods you bought. The same generally applies to loyalty points and reward schemes tied to personal spending. Who it affects differently: the self-employed and businesses. If you use a card for business purchases and claim those purchases as allowable expenses, cashback or rebates earned on that spending should usually reduce the amount of expense you claim, because your real cost was lower. In effect it lowers your deductible costs rather than being taxed as extra income. Sole traders should keep this consistent in their records. A further wrinkle: if cashback is paid as part of a trade or in return for a service you provide (rather than as a discount on your own purchase), it can be taxable. The deciding factor is whether the payment is a rebate on your spending or a reward for something you have done in a business capacity. Worked context: a personal cardholder earning GBP 150 of cashback over the year on household spending pays no tax and ignores it entirely. A sole trader who earns GBP 150 cashback on GBP 15,000 of card spend, of which GBP 10,000 was claimed business expenses, would generally reduce the relevant claimed expenses by the proportionate cashback rather than declaring income. If you are self-employed and unsure how to record it, use the self-employed tax calculator to model your profit, and check gov.uk business income guidance for borderline cases.

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