Image of Crypto coins

Is crypto cashback taxable?

Today we’re exploring the world of Crypto cashback and asking Recap to outline the tax implications of this emerging rewards system now being offered by some exchanges. If you’re using a crypto-cashback card, or you are thinking of getting one, this article is for you!

What is crypto cashback?

Some large crypto providers like Binance, Coinbase, and have started to offer rewards to their users for using their crypto cards to make purchases. These cards are like a regular debit card and can be used to make purchases in most retailers providing rewards for qualifying purchases.

Cashback typically takes the form of a percentage return on purchases paid in crypto. For example if my card offers 4% back in CRO token and I spend £100 - I will receive £4 worth of CRO as a reward for qualifying spends.

Users will normally need to add funds to their card before making a purchase via their exchange or wallet.

Tax treatment for cashback

There’s no specific HMRC guidance on the tax treatment of cash back rewards received in crypto assets, however there’s guidance1 on the receipt of cashback in general and this is likely to apply.

HMRC state:

"A sum, however described, which is received by an ordinary retail customer as consideration for the purchase by the customer of goods or services should not be regarded as a taxable receipt in computing profits under Case VI. This is the case whether the payer is the provider of the goods or services or another party with an economic interest in ensuring the transaction takes place."

Assuming this guidance is also applied to crypto asset cash back rewards then they shouldn’t be treated as taxable income where they aren’t received in the course of a trade. Good news for card users! However, you still need records of the receipt for when you sell the assets in the future

Disposing of crypto cashback rewards

If a cashback user later decides to swap their crypto rewards for other types of crypto or fiat currency, they’ll be making a taxable disposal and possibly an acquisition. In this case, capital gains tax rules will apply - we've provided lots more information on the specifics of crypto mining tax, as this is slightly different.

In order to calculate the capital gains tax owed, we first need to know the cost basis of the assets being disposed of. There’s no HMRC guidance on the acquisition cost of non-taxable airdrops, therefore this remains an area of uncertainty.

The worst case (for taxpayers) would be to assume the acquisition cost of the assets was Nil. For example, if I receive 100 CRO as a reward and then swap this for £20 GBP I would pay capital gains tax on £20 - £0 = £20.

On the other hand, you could argue that the cost-basis for airdropped rewards should be the fair market value of the reward at the time it was received. For example, if I receive 100 CRO (valued at the time of receipt at £10) and later swap this for £20 GBP, I would pay capital gains tax on £20 - £10 = £10.

Please remember - this article isn’t tax advice. For a more comprehensive overview of crypto cashback and other types of crypto transactions see, Recap’s comprehensive UK crypto tax guide. Alternatively, explore more insights on this ever-growing investment style with our guide on paying UK crypto tax, our DeFi tax guide and our guide on tax for crypto airdrops.

Author: David Collins is Head of Growth at crypto tax calculation service Recap



Speak to an accounting expert

If you're unsure what level of support you need, our friendly team are on hand to help you pick the right package for you.
team photo off all crunch team
Share this post
Updated on
March 21, 2023

Knowledge Hubs

Speak to the experts

Our UK based team of experts are ready to help you find the best accounting package for you and your business.

icon of a green tick
Certified Accountants
icon of a green tick
HMRC Approved
Senior Sales Advisor
Book a meeting
Crunch Pro Tip
Using cloud-based accountancy software to manage your finances gives any small business a big advantage!

At Crunch we provide affordable cutting-edge, easy-to-use software with real human support from expert chartered accountants. That’s probably why 81% of our clients would recommend Crunch.

Crunch Pro Tip
Did you know - you have access to a Chartered Certified accountant for free on our paid subscriptions?

Book a call with our one accountants and get your questions answered. Just £24.50 +VAT for Crunch Free users.

Crunch Pro Tip
Did you know - Financial forecasting can allow you to predict any financial changes in your business and see the results of potential new ideas?

Our partnership with Brixx forecasting software gives our paid plan clients access to a financial forecasting tool for free.

Crunch Pro Tip
Did you know - Your Self Assessment has to be filed by the 31st of January deadline?

Crunch’s Self Assessment service provides an expert accountant to complete, check, and file your Self Assessment for you for just £140 +VAT.

Crunch Pro Tip
Did you know - We have a free plan that is great for sole traders and limited companies?

Why not see for yourself? It’s simple and easy to use and 100% free.