This article aims to help in answering the question of whether or not cashbacks are taxable in the UK. To explore this topic in depth we will discuss how cashbacks can be sourced, how they are treated in financial terms as well as explore how cashbacks generally work in the UK.

Is Cashback Taxable In The UK?

No, cashbacks are not taxable in the UK. The HMRC has clearly stated that even though cashbacks may be considered income in certain cases they are not taxable. In some cases, if you get cashbacks through spending money for shopping, this will not be considered income so there is no question of the amount being taxed. 

Therefore, amounts received through cashbacks should not be added to your self-assessment form when you file a tax return.

However, certain exceptions apply to this rule. According to the HMRC’s Savings and Investments manual, cashbacks received under the following conditions may be subject to taxes:

  • the amount of cashback is payable under a legal obligation
  • the payments will recur for more than a year
  • the payments can be classed as income, not capital, by the recipient 
  • the payments represent profit to the recipient

Since cashbacks are mostly received by individuals when they purchase from a seller, they are usually categorised as discounts received from a retailer. While it is common for credit card companies to offer cashbacks when you use them to make payments, certain current accounts also offer cashbacks. Then some websites allow you to avail of shopping discounts by using the cashback option.

Some of the leading cashback websites in the UK are:

  • TopCashback
  • Quidco
  • Swagbucks

There are different types of taxable income in the UK. These include any income from employment, self-employment, investments, property, and pensions. The tax rates for each of these types of income can vary, so it’s important to understand the rates before you start earning money.

In general, the tax rate for employment income is 20%, while the rate for self-employment income is 9%. Investment income is taxed at a rate of 10%, while property income and pension income are taxed at a rate of 20%. However, these rates can change depending on your circumstances, so it’s always best to speak to a tax advisor if you’re not sure how your income will be taxed.

How Can I Get Money Through Cashbacks?

There are several ways to get cashback in the UK. The most popular method is to use a cashback credit card. This type of card allows you to earn cashback on your everyday purchases as well as payment of your utility bills using your credit card. 

You can also avail of cashbacks through a cashback bank account and get instant monetary rewards when you use your account to pay bills. However, you might need to deposit a certain amount of money in your account or pay a monthly fee to avail of these services.

Cashback sites are a popular way to earn money on your everyday purchases. These sites work by giving you a percentage of your purchase back in the form of cash, which you can then withdraw or use to purchase other items.

There are some cashback sites available in the UK, so it’s worth doing some research to find the one that best suits your needs. Once you’ve found a cashback site you’re happy with, simply sign up and start earning money on your everyday purchases.

Below are estimated cashback rates on some of the cashback websites in the UK:

  • Expedia will give you up to 11% cashback 
  • Paperchase will give you up to 10.5% cashback
  • ASOS will give you up to 8.4% cashback
  • Travelodge will give you up to 8% cashback
  • Game will give you up to 2.1% cashback
  • Virgin Media will give you up to £115.50 cashback
  • O2 Mobile will give you up to £110 cashback

How Do Cashbacks Work?

A cashback is a rebate or discount on the purchase of a product or service. The rebate is typically paid by the merchant to the consumer at the time of purchase, but it can also be paid directly to the consumer’s bank account or credit card.

In the UK, cashbacks are becoming more popular, with a growing number of retailers offering them as an incentive to customers. There are a few different ways that cashbacks can work, and it’s important to understand how they work before you start using them.

There are also many websites and apps that offer cashback on your online purchases. And finally, some retailers offer in-store cashback when you make a purchase using your debit or credit card.

Generally, cashbacks are either paid as a percentage of the purchase price (e.g. 5%) or as a fixed amount (e.g. £5). Some cashback deals will have a minimum spend requirement, and some will have a maximum cap on the amount of cashback that can be earned. Additionally, some

How Are Incomes Taxed?

Incomes are taxed as per the below criteria:

  • 0% income tax when income is up to £12,570
  • 20% income tax when income is between £12,571 and £50,270 
  • 40% income tax when income is between £50,271 and £150,000 
  • 45% income tax when income is above £150,001

This means that a certain amount of your income will remain tax-free as it is considered to be a Personal Allowance. The amount set for Personal Allowance during the current tax period is £12,570. 

Therefore, incomes over and above this amount are subject to tax while incomes that remain within this limit are not to be taxed. Personal allowance applies to your combined income from different sources.

Conclusion:

The above discussion has helped to conclude that cashbacks are generally tax-free even though they may be treated as income and not discounts in some cases. The reason for this lies in the fact that cashbacks serve as cash rewards for consumers who use certain financial services such as credit cards, bank accounts or online shopping websites to make purchases based on a reward system. 

References:

Cashback Tax Question – Community Forum – GOV.UK

Top cashback sites 2022 – Save the Student

SAIM8020 – Annual payments: meaning of annual payment – HMRC internal manual – GOV.UK

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