Hi where does credit card cash back get put?
You can tag it to reduce card charges or book as other income
Hello, sorry to dig up this old topic but it misled me so I’d like to provide some clarification if it’s allowed.
HMRC support admins wrote several times on different topics :
Some bank accounts pay a loyalty reward each month to the account holder. These banking awards are taxable income, categorised as ‘other’ income. They are not classed as bank interest and do not count towards the personal savings allowance. However ‘cash back’ paid to a customer as a result of a purchase made is not taxable.
So… Barclay’s or Wise GBP 0.5% Card Cashbacks linked to a purchase are not taxable and shouldn’t be tagged as other income.
As @QFSteve said in How to tag refunds, I don’t see other way to consider it as a refund and record a Money-in transaction on my bank account and tag it as “7901 Bank Charges”. Is there other overhead nominal to put it ?
I asked Wise and they have confirmed me that their GBP 0.5% Card Cashbacks linked to a purchase are not taxable in UK. It has to be distinguished from regular balance cashbacks which are taxable and actually categorized as other incomes in UK.
For those who are non-uk residents like me, concerning Wise EUR account, regular balance cashbacks are considered as interests by Belgian authorities and Wise is forced to withhold 30% before payment into you account therefore to avoid double taxation with your country, you had to ask for Belgian refund FORM 276 INT. More details here
Hope this helps,
Ben
It is still income, but what HMRC are saying is that it’s not taxable income.
If you’re a limited company then the cashback belongs to the company and you’d probably need to create a new nominal account in the sales section to tag the cashbacks. This would mean they (correctly) show as income on the P&L report in your accounts, but they’re separated out from the rest of the sales income so you can easily deduct them on your corporation tax return.
If you’re a sole trader/partnership then legally you and the business are the same entity, so in that case you might just as well tag the cashbacks to your drawings account the same as any other amounts of your own money that have been introduced into the business.
Hello Ian, thanks for your report, it’s so nice.
Indeed, I’m a limited company and my accounting knowledge is poor…
You mean in Quickfile there’s no nominal code reserved for not-taxable income ?
So you think it’s not correct to consider cashback as a bank refund, I respect your point of view but what troubles me is that these cashbacks are linked to purchases, not sales.
I thought that by tagging it to overheads will be more accurate.
I like the idea of creating a nominal code reserved for cashbacks, but then we need to create two codes,
one for card cashbacks and another for regular balance cashbacks.
Ben