I have a pre-paid VISA card with a 2% cashback paid in cryptocurrency in every purchase. I was wondering how this is taxed?

  • What exactly do you think is going to be taxed here?
    – mustaccio
    Jun 4 '20 at 18:31

Rewards for cards or accounts don't count as taxable income, whether the rewards are cash or something else. So you won't owe any income tax on this.

However, cryptocurrencies are liable for capital gains tax if you make a profit on any sale in the future (if it's more than your annual CGT allowance). So you may need to keep a record of the value of any cryptocurrencies at the time you receive them.

(Updated due to comment from GS regarding capital gains tax.)

  • 2
    There is CGT on any changes in value after receipt though, if it's not sold immediately. If there's any chance of going over the annual allowance for that, they'd need to identify the cost basis at the time of receipt and track it. Jun 5 '20 at 8:21
  • @GS-ApologisetoMonica Good point; thank you. Have updated answer to include this info. Jun 5 '20 at 12:45
  • Excellent, so it's taxable on disposal, so I don't have to worry until selling. Thanks! Jun 5 '20 at 17:09
  • @GS-ApologisetoMonica if it's a reward, then the cost it's zero, so I'm not sure why I should keep records of the value at the time I receive the cashback (I will do it anyway though, but it won't be necessary for the CGP). Jun 5 '20 at 19:44
  • 1
    @AntonioAndrés no, the cost basis is the 2% of your spending that it represents, or alternatively the value at the time you receive it. (Those should be similar numbers modulo short-term fluctuations in value and the costs of actually buying/selling it). Think of it like this: your card gives you 2% cashback in normal currency, and then you buy cryptocurrency with that currency. You pay no tax on the cashback, and you potentially pay CGT on the cryptocurrency, if the eventual selling price is higher than what you originally bought it for. Jun 5 '20 at 20:23

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.