Tax on Cash Back?

chris.green13

I have a Santander 123 Account. Obviously I have to pay tax, through my SA tax return, on the interest I get on my current account balance.

But what about the "cash back" I get on some purchases. Do I have to declare this and pay tax on it? It's not like Tesco Clubcard points, it's actual cash which shows on my bank statement, so I have this sneaking worry that HMRC will want their cut.

Savvy_Sue

I do hope not ...

My feeling is 'not', because the money from all the cashbacks goes into your account. You get interest on the account, and that interest is paid net of tax. So the point at which you are taxed is when interest is calculated, not on the payment.

I'm sure if I'm wrong, someone will let us know. I've earned quite a lot of cashback from TopCashBack too, and I guess the same question would apply there ...

chrisbur

Savvy_Sue wrote: »

I do hope not ...

My feeling is 'not', because the money from all the cashbacks goes into your account. You get interest on the account, and that interest is paid net of tax. So the point at which you are taxed is when interest is calculated, not on the payment.

I'm sure if I'm wrong, someone will let us know. I've earned quite a lot of cashback from TopCashBack too, and I guess the same question would apply there ...

Sorry have to disagree on that, on that basis tax would not be due on a persons salary which went into their account and had tax deducted on the interest.

In theory I believe it would depend on what the cashback was for.

So if you purchased goods (eg television) or services (eg Home insurance) this would be seen as the supplier giving a discount and as this was in effect just a reduction in the price you were paying I beleive that no tax would be due on that.
If you were paid for doing something (eg looking at a supplier's website or writing a review of something) then you are being paid for doing something and I believe that tax would be payable on that.

In practice I do not think that HMRC are ever going to take the trouble of looking into these payments. The work involved would be far more costly than any tax that was generated.
Probably.

EDIT
Having re-read not sure that this is the sort of cash-back that I get. Does the money come from the suppliers in the first place or is it from Santander. Perhaps only HMRC can give a definite answer on this.

zygurat789

Surely if the cashback was taxable the onus is on Santander to deduct the tax at source.

cinereus

HMRC: "There is no question of tax becoming payable on cashbacks received from credit, debit and loyalty cards or any other kind of cashback payment."

Nutcase243

Can you give a more definitive source for that statement?

noh

Nutcase243 wrote: »

Can you give a more definitive source for that statement?

That statement is a quote from a Telegraph article.
http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/10027264/Will-I-have-to-pay-tax-on-credit-card-cashback.html

For an answer closer to source see example 3 here
http://www.hmrc.gov.uk/manuals/saimmanual/SAIM8050.htm

sleepless_saver

Halifax deduct tax from their Reward cashback at source, and their website points out that you may be liable for more tax if you pay higher rate tax. I wonder if you could reclaim the tax from HMRC if you're not a taxpayer?

Steve059

sleepless_saver wrote: »

<snip> I wonder if you could reclaim the tax from HMRC if you're not a taxpayer?

You can. I do. Halifax can't pay the Reward payments gross of tax to non-taxpayers, because it's not interest. However, HMRC regard it as additional income, on which tax paid can be reclaimed.

jimmo

Nutcase243 wrote: »

Can you give a more definitive source for that statement?

https://www.gov.uk/government/publications/statement-of-practice-4-1997/statement-of-practice-4-1997

cte1111

I think that cashback is not taxable, where as payments from a bank as a reward for having their account are taxable, as they are seen as similar to interest, which is taxable.

They do tax annual cashback payments from investments, but again this is a specific case and they do not intend to apply it to other cashback agreements.

An example from HMRC:
In essence, each payment represents a one-off rebate of amounts that [the person] 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.