Paying tax this weekend? Remember credit card fees have been slashed!

If you have a large chunk of self-assessment income tax due this weekend, there is an upside.

This is the first self-assessment payment deadline since HMRC slashed its credit card fee to roughly 0.4%.

One of the biggest jokes, since the EU cap on Visa and MasterCard fees came into effect last December, was that the Government itself was ignoring them.  The fee for paying your tax with a credit card actually rose in January to 1.5%.

The great news is that this move was reversed in early April.  HMRC is now offering ‘interchange plus’ when calculating your credit card fee.  That may sound like a very boring statement but, for many of us, it was the most exciting news to hit the miles scene in a while.

These fees apply when paying self-assessment tax, VAT, employers NIC / PAYE or any tax collected by HMRC.

For a self-employed person such as myself, this will be a fantastic miles and points generator.  I still have the BMI Platinum MasterCard which earns 2.5 Avios per £1.

The new HMRC fee on this card is 0.386%.  This means that I will be able to ‘buy’ Avios for 0.15p each! 

HMRC logo

Here is the full list of fees:

VISA Personal Credit Card 0.415%
MasterCard Personal Credit Card 0.386%
MasterCard World Premium Credit Card 0.374%
MasterCard Signia Premium Credit Card 0.606%
MasterCard Elite Premium Credit Card 0.606%

VISA Business Credit Card 1.508%
VISA Corporate Credit Card 1.744%
VISA Purchasing Credit Card 1.755%
MasterCard Business Credit Card 1.973%
MasterCard Corporate Credit Card 2.248%
MasterCard Purchasing Credit Card 2.406%
MasterCard Fleet Credit Card 2.134%

You can now clearly see the gulf that has opened up between corporate credit cards, which are not impacted by the EU fee caps as long as the bill is settled by a business, and personal cards.

To take full advantage of this, you need a Visa or MasterCard which has a decent earnings rate.  Those are harder to find these days on free cards but some paid cards do have strong rates.

The Virgin Flying Club Black Visa, for example, earns 1 mile per £1.  Paying 0.4p per Virgin mile would be an excellent result.  The same goes for the Emirates Skywards Elite card.

The Lufthansa Miles & More Visa earns 0.75 miles per £1 – and the card is free.  You would be paying around 0.5p per mile which would allow someone with large tax bills to get themselves into the excellent Lufthansa First Class product at low cost.

The IHG Rewards Club Premium MasterCard earns 2 IHG Rewards Club points per £1, which I value at 1p.  The card has a £99 fee but this is offset by the sign-up bonus in year one.  You also receive a voucher for a free hotel night when you spend £10,000.

The Lloyds Avios Rewards MasterCard is the best Avios route if you don’t hold a legacy card.  However, at just 0.25 Avios per £1, you will be paying well over 1p per point.  It doesn’t make sense, frankly.

Alternatively, you could use the Tesco Clubcard MasterCard.  I am cynical about this card because they round down transactions to the nearest £8.  On big payments like tax, however, this doesn’t make any difference.  You would earn 0.125 Clubcard points per £1 charged which gets you 0.3 Avios per £1.  This still doesn’t justify a 0.4% card fee, however.

If you are prepared to jump through the hoops required to get one, the HSBC Premier credit card at 0.5 Avios points per £1 is interesting – you would by paying around 0.8p per Avios.  The new HSBC Premier World Elite credit card is even better at 1 Avios point per £1, although the fee on that is 0.606%, so 0.6p per Avios.

The big winners here will be the self-employed or SME owners who have a legacy Visa or MasterCard with a high earnings rate.  Even without a legacy card, however, you could do very nicely by getting one of the card products above.

You can even make a profit on your tax.  Get a MasterCard or Visa paying the equivalent of 0.5% cashback (ASDA or John Lewis, for example) and you are in profit after paying the 0.386% fee!

This is not a long term opportunity, unfortunately.  The earning rates on many Visa and MasterCard cards are unsustainable under the new EU rules and will be slashed as contracts come to an end.  For a couple of years, however, you can do very nicely …..

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

Bits: Which? magazine writes about HFP readers, the BA Amex Premium card lives!
LAST CHANCE to transfer TopCashback money into Tesco Clubcard and onto Avios
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  1. What about the HSBC premier MasterCard?

    • Have you not read all of Robs post?

      • Missed it, my bad. I’ll give it a go and report back what the fees are.

        • And it now looks like the article has been amended from the original.

          Another point is that if this is expenses through a company then there are obvious tax benefits which may tip the scales in terms of making it worthwhile.

  2. Just paid my tax bill yesterday :( thought it was still a 2% fee

    • Imbruce says:

      Hi Amit,
      The fee varies depending on the type of card used. If your fee is high
      use a different card.
      The fee on Curve is very high. I paid a small bill of £200 odd and the fee
      using Curve was £4:65 vs about 95pence using my AADvantage Visa

  3. I signed up for the IHG premium Mastercard to put tax payments through – 2 IHG points per £ seemed good value when including the free night for £10k spend. I did this in a week between a VAT bill and Self Assessment!

    • Be interested to know how long it takes for the free night voucher to come through

  4. paid mine at the start of the month, had to do it in chunks due to my limit with mbna – I used my etihad card – not great, but i can claim back my credit card fees as i am self employed :)

  5. I have made payments with HSBC world elite card, it attracts a fee of 0.606%

  6. Surely the EU cap on Visa and MasterCard fees will go away anyway with Brexit.

    • Genghis says:

      I don’t think it will. I doubt there’d be a full blown reversal of all EU driven legislation / regulations but only those which would then directly permit Brexit (e.g. ECA, 1972). And anyway, interchange fees supposedly help the consumer (not everyone is a points collector!) and prevent MC/Visa/Amex from ‘lining their pockets’. Why would HMG reverse that?

      • I met a Brexiteer the other day who thought that health and safety legislation no longer applied because it was ‘a product of the EU nanny state’ – and I realised he imagined it would be literally the tearing up of a giant rule book.
        When, of course, there will be no time to debate any of the thousands of rules and it will probably all be transcribed across into UK law at high speed and at eye-watering expense.

        • Sigh, he also probably thought we spent £350m/wk on it too and that the money would now be going to the NHS..

        • It already is in UK law.

          You may remember the Cameron ‘war on red tape’. After looking at every rule, they found ONE which got scrapped – the law on who can buy liqueur chocolates. That was it.

  7. A couple of points – it’s strange that the consumer credit rates differ at all as the interchange fee is the same across all of these.

    Curve is more expensive is it uses a commercial card interchange rate.

  8. Anyone tried Supercard?

    • This would be a bad idea, 1% fee on UK transactions for a start and no loyalty program over using the card direct and not having to pay the 1% fee.

  9. Andrew Stock says:

    What about the Hilton Honnors card visa?

    Can be good value if you use points and cash deals.

  10. Is there some sort of restriction on how many different cards you can use to pay one bill or did I dream that?
    We have a CGT bill of about 40K to pay next Jan. We both have the free BMI and my husband has the free Virgin MBNA. I think they mostly have 5k credit limits, do you just keep paying it on chunks?

    • There is a note on their website about this but I believe it is more to stop multiple payments of small amounts rather than say 4 payments of 10k.

      Would be interested to hear if people have used more than 1 card recently?

      • Northern Lad says:

        No issues with paying any bill with multiple cards and amounts over a period of time.

        It takes 3 days for the transaction to clear down on the cards with hmrc payments made online. This is longer then most payments take.

        You can then make an intra-month payment to the card company by either faster payment or debit card and start the process again.
        You need to make sure the hmrc payment has cleared, otherwise you won’t be able to make the next payment as your credit card will show ‘in credit’.

        If you’re using a Mbna card, you will also get an intermittent issue with ‘C5’ code. This is resolved by calling their fraud team (tel no on message) and advising it’s a genuine payment.

    • Yes. My plan for H2 is to settle my Jan 17 tax bill in weekly chunks!

  11. I would have forgotten to pay my tax without this timely reminder.HFP saves me from a fine – thanks !

  12. I did my corporation tax and self assesment over a few payments on visa bmi. Had no issues paying in chunks of 15k then settling bill via debit card- only issue i had was overpaying visa and card being refused. Called up and was told card was in credit and they had to refund this before could use card again.

    Off topic- i have a couts silk carp that gets me good travel insurance, car excess waiver insurance as well as priority pass with access for up to 4 people, for a fee of £150pa- HOWEVER just been informed all these benefits are ending. Any advice on cards that may offer similair steering clear of amex platinum with its hefty fee…….

  13. KBuffett says:

    I missed this post, and had already paid my obscene tax bills.

    Rob – it would be really useful to have an iOS app with push alerts for new posts. I often don’t remember to check your site for updates.

    • So which works out better, ihg or Hilton?

      • Free Hilton card is 2 points per £1 which I’d value at 0.6p or 1p if using cash and points. Free IHG card is point worth 0.5p.

        However IHG Premium is 2 per £1 (worth 1p) plus the free night for hitting £10,000.

    • AndyGWP says:

      You should subscribe to the emails :)

      • No, that kills my ad revenue! Visit the site daily instead.

        The other upside is that you read reader-corrected articles rsther than the error-strewn ones which get emailed!

  14. Russell says:

    > VISA Personal Credit Card 0.415%
    > MasterCard Personal Credit Card 0.386%
    > MasterCard World Premium Credit Card 0.374%
    > MasterCard Signia Premium Credit Card 0.606%
    > MasterCard Elite Premium Credit Card 0.606%

    I am fascinated by these figures – most particularly the lower figure for MasterCard World compared with ordinary MasterCards.

    Shortly after MasterCard World appeared, I got a letter from Streamline (my then Merchant Acquirer, now WorldPay) telling me that they would in future be charging an additional 0.6% (to cover the extra benefits of the cards) over and above what they charged for plain MasterCard. As a result I have never used my MasterCard World cards (Marriott and the new IHG Card) in small businesses, who I assumed would also be paying over the odds. Certainly, no small business owner I know has seen any significant reduction in their Merchant Aquirer fees. I am rather out of touch now, having sold up at the end of 2013.

  15. Wow! I thought HMRC did not accept credit cards at all – will my Virgin Atlantic Visa work, I am assuming? I don’t think I will be filing tax for year ending April 2016 until Nov end – am I able to split my tax bill? *fingers crossed*

  16. Would one earn clubcard points if paying with a tesco debit card?

  17. Is it known conclusively yet what the HMRC fee will be for using the new HSBC Premier World Elite MasterCard? 0.606 or 0.374?