diff --git a/localenv/mock-account-servicing-entity/generated/graphql.ts b/localenv/mock-account-servicing-entity/generated/graphql.ts
index 66a0f79622..0e4dbb1b63 100644
--- a/localenv/mock-account-servicing-entity/generated/graphql.ts
+++ b/localenv/mock-account-servicing-entity/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/packages/backend/src/graphql/generated/graphql.schema.json b/packages/backend/src/graphql/generated/graphql.schema.json
index e1e634ff92..a133e9776e 100644
--- a/packages/backend/src/graphql/generated/graphql.schema.json
+++ b/packages/backend/src/graphql/generated/graphql.schema.json
@@ -4266,6 +4266,12 @@
         "inputFields": null,
         "interfaces": null,
         "enumValues": [
+          {
+            "name": "CANCELLED",
+            "description": "The payment is cancelled before completion, and no further funds will be accepted.",
+            "isDeprecated": false,
+            "deprecationReason": null
+          },
           {
             "name": "COMPLETED",
             "description": "The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call.",
diff --git a/packages/backend/src/graphql/generated/graphql.ts b/packages/backend/src/graphql/generated/graphql.ts
index 66a0f79622..0e4dbb1b63 100644
--- a/packages/backend/src/graphql/generated/graphql.ts
+++ b/packages/backend/src/graphql/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/packages/backend/src/graphql/schema.graphql b/packages/backend/src/graphql/schema.graphql
index de3c7a524f..34c9e7849d 100644
--- a/packages/backend/src/graphql/schema.graphql
+++ b/packages/backend/src/graphql/schema.graphql
@@ -1044,6 +1044,8 @@ enum IncomingPaymentState {
   COMPLETED
   "The payment has expired before completion, and no further funds will be accepted."
   EXPIRED
+  "The payment is cancelled before completion, and no further funds will be accepted."
+  CANCELLED
 }
 
 type Amount {
diff --git a/packages/backend/src/open_payments/payment/incoming/model.test.ts b/packages/backend/src/open_payments/payment/incoming/model.test.ts
index d9a332c245..2dc3207a1d 100644
--- a/packages/backend/src/open_payments/payment/incoming/model.test.ts
+++ b/packages/backend/src/open_payments/payment/incoming/model.test.ts
@@ -116,7 +116,11 @@ describe('Models', (): void => {
         })
       })
 
-      test.each([IncomingPaymentState.Completed, IncomingPaymentState.Expired])(
+      test.each([
+        IncomingPaymentState.Completed,
+        IncomingPaymentState.Expired,
+        IncomingPaymentState.Cancelled
+      ])(
         'returns incoming payment with existing methods if payment state is %s',
         async (paymentState): Promise<void> => {
           incomingPayment.state = paymentState
diff --git a/packages/backend/src/open_payments/payment/incoming/model.ts b/packages/backend/src/open_payments/payment/incoming/model.ts
index 8a35c743b1..c69ecc2040 100644
--- a/packages/backend/src/open_payments/payment/incoming/model.ts
+++ b/packages/backend/src/open_payments/payment/incoming/model.ts
@@ -33,7 +33,10 @@ export enum IncomingPaymentState {
   Completed = 'COMPLETED',
   // If the payment expires before it is completed then the state will move to `EXPIRED`
   // and no further payments will be accepted.
-  Expired = 'EXPIRED'
+  Expired = 'EXPIRED',
+  // If the payment is cancelled before it is completed then the state will move to `CANCELLED`
+  // and no further payments will be accepted.
+  Cancelled = 'CANCELLED'
 }
 
 export interface IncomingPaymentResponse {
@@ -116,7 +119,10 @@ export class IncomingPayment
   public cancellationReason?: string | null
 
   public get completed(): boolean {
-    return this.state === IncomingPaymentState.Completed
+    return (
+      this.state === IncomingPaymentState.Completed ||
+      this.state === IncomingPaymentState.Cancelled
+    )
   }
 
   public get incomingAmount(): Amount | undefined {
@@ -163,7 +169,8 @@ export class IncomingPayment
         })
         .whereNotIn('state', [
           IncomingPaymentState.Expired,
-          IncomingPaymentState.Completed
+          IncomingPaymentState.Completed,
+          IncomingPaymentState.Cancelled
         ])
     } else {
       incomingPayment = await IncomingPayment.query()
@@ -172,7 +179,8 @@ export class IncomingPayment
         })
         .whereNotIn('state', [
           IncomingPaymentState.Expired,
-          IncomingPaymentState.Completed
+          IncomingPaymentState.Completed,
+          IncomingPaymentState.Cancelled
         ])
     }
     if (incomingPayment) {
@@ -184,7 +192,8 @@ export class IncomingPayment
   public isExpiredOrComplete(): boolean {
     return (
       this.state === IncomingPaymentState.Expired ||
-      this.state === IncomingPaymentState.Completed
+      this.state === IncomingPaymentState.Completed ||
+      this.state === IncomingPaymentState.Cancelled
     )
   }
 
diff --git a/packages/backend/src/open_payments/payment/incoming/service.test.ts b/packages/backend/src/open_payments/payment/incoming/service.test.ts
index d01c72b7c0..ea08f4e5f9 100644
--- a/packages/backend/src/open_payments/payment/incoming/service.test.ts
+++ b/packages/backend/src/open_payments/payment/incoming/service.test.ts
@@ -310,6 +310,9 @@ describe('Incoming Payment Service', (): void => {
         assert.ok(!isIncomingPaymentError(canceledIncomingPayment))
         expect(canceledIncomingPayment.id).toBe(incomingPayment.id)
         expect(canceledIncomingPayment.cancelledAt).toBeDefined()
+        expect(canceledIncomingPayment.state).toBe(
+          IncomingPaymentState.Cancelled
+        )
         expect(!canceledIncomingPayment.approvedAt).toBeTruthy()
       })
 
@@ -330,6 +333,9 @@ describe('Incoming Payment Service', (): void => {
         assert.ok(!isIncomingPaymentError(canceledIncomingPayment))
         expect(canceledIncomingPayment.id).toBe(incomingPayment.id)
         expect(canceledIncomingPayment.cancelledAt).toBeDefined()
+        expect(canceledIncomingPayment.state).toBe(
+          IncomingPaymentState.Cancelled
+        )
         expect(!canceledIncomingPayment.approvedAt).toBeTruthy()
         expect(canceledIncomingPayment.cancellationReason).toBe(reason)
       })
diff --git a/packages/backend/src/open_payments/payment/incoming/service.ts b/packages/backend/src/open_payments/payment/incoming/service.ts
index 1e07f445e4..8ddce21223 100644
--- a/packages/backend/src/open_payments/payment/incoming/service.ts
+++ b/packages/backend/src/open_payments/payment/incoming/service.ts
@@ -341,7 +341,8 @@ async function processNextIncomingPayment(
     }
     if (
       incomingPayment.state === IncomingPaymentState.Expired ||
-      incomingPayment.state === IncomingPaymentState.Completed
+      incomingPayment.state === IncomingPaymentState.Completed ||
+      incomingPayment.state === IncomingPaymentState.Cancelled
     ) {
       await handleDeactivated(deps, incomingPayment)
     } else {
@@ -512,7 +513,8 @@ async function cancelIncomingPayment(
     if (!payment.cancelledAt) {
       await payment.$query(trx).patch({
         cancelledAt: new Date(Date.now()),
-        cancellationReason: cancellationReason
+        cancellationReason: cancellationReason,
+        state: IncomingPaymentState.Cancelled
       })
     }
 
diff --git a/packages/card-service/src/graphql/generated/graphql.ts b/packages/card-service/src/graphql/generated/graphql.ts
index ba49c0cfa9..28709e21ed 100644
--- a/packages/card-service/src/graphql/generated/graphql.ts
+++ b/packages/card-service/src/graphql/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/packages/frontend/app/generated/graphql.ts b/packages/frontend/app/generated/graphql.ts
index 93e817e0f0..b7d76d6c1d 100644
--- a/packages/frontend/app/generated/graphql.ts
+++ b/packages/frontend/app/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/packages/mock-account-service-lib/src/generated/graphql.ts b/packages/mock-account-service-lib/src/generated/graphql.ts
index 66a0f79622..0e4dbb1b63 100644
--- a/packages/mock-account-service-lib/src/generated/graphql.ts
+++ b/packages/mock-account-service-lib/src/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/packages/point-of-sale/src/graphql/generated/graphql.ts b/packages/point-of-sale/src/graphql/generated/graphql.ts
index a5a2ba76b2..e5d3e586ba 100644
--- a/packages/point-of-sale/src/graphql/generated/graphql.ts
+++ b/packages/point-of-sale/src/graphql/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */
diff --git a/test/test-lib/src/generated/graphql.ts b/test/test-lib/src/generated/graphql.ts
index 66a0f79622..0e4dbb1b63 100644
--- a/test/test-lib/src/generated/graphql.ts
+++ b/test/test-lib/src/generated/graphql.ts
@@ -709,6 +709,8 @@ export type IncomingPaymentResponse = {
 };
 
 export enum IncomingPaymentState {
+  /** The payment is cancelled before completion, and no further funds will be accepted. */
+  Cancelled = 'CANCELLED',
   /** The payment is completed automatically once the expected `incomingAmount` is received or manually via an API call. */
   Completed = 'COMPLETED',
   /** The payment has expired before completion, and no further funds will be accepted. */