Maximise your Avios, air miles and hotel points

Big news – HMRC cuts its credit card fee to 0.4% which means VERY cheap points

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One of the biggest jokes, since the EU cap on Visa and Mastercard fees came into effect in 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 has been reversed.  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 is 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.

I did a test on this card yesterday and the new HMRC fee is 0.386%.  This means that I will be able to ‘buy’ Avios for 0.15p each. 

I tested another couple of cards:

Marriott Rewards Mastercard – 0.374% (0.37p per Marriott point)

IHG Rewards Club Premium Visa – 0.415% (0.2p per IHG point)

Curve – 1.973%

The Curve card figure is high because this is classified as a business card and is not subject to the caps on interchange fees imposed by the EU.  Whilst high, you may still find 1.973% worth paying if you recharge your tax bill to an underlying American Express – especially if it lets you trigger a 2-4-1 voucher more quickly.

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 Lloyds Premier Avios Mastercard is the best Avios route if you don’t hold a legacy card.  However, at just 0.3 Avios per £1, you will still be paying just over 1p per point.  That will make sense for some people but not all.  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 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.

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 points from credit cards? – January 2022 update

If you are looking to apply for a new credit or charge card, here are our January 2022 recommendations based on the current sign-up bonus

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the top current deals.

There are special sign-up bonuses on both of the BA American Express cards until 28th February 2022. The bonus on the free card is doubled to 10,000 Avios and the bonus on the Premium Plus card is increased from 25,000 Avios to a huge 40,000 Avios.

British Airways BA Amex American Express card

British Airways American Express

10,000 Avios for signing up (SPECIAL OFFER) and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

40,000 Avios (SPECIAL OFFER) and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers.

The bonus on the Capital On Tap card is increased from points worth 10,000 Avios to 30,000 Avios until 4th February 2022.

The bonus on the British Airways Accelerating Business card is increased from 30,000 Avios to 45,000 Avios until 28th February 2022.

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

Amex Platinum Business American Express

American Express Business Platinum

40,000 points sign-up bonus and a long list of travel benefits Read our full review

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

45,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Capital on Tap Visa card

Capital On Tap Business Rewards Visa

30,000 points bonus – the most generous Avios Visa for a limited company Read our full review

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.

Apply 31st March 2022 and your cashback will be increased to 2% for the first three months.

Barclaycard Select Cashback credit card

1% cashback (2% for your first 3 months) and no annual fee Read our full review

Comments (85)

  • Newsroom April 2nd - Virgin America and Delta to strike a deal, AA reduced mileage awards, take JetBlue Mint to the Caribbean | MightyTravels says:

    […] if you are a UK tax payer – you have just been dealt a hand to buy miles at less than 1 […]

  • Rich Spencer says:

    Does anyone know whether you can apply the voucher to a booking retrospectively in the case of the Lloyds upgrade voucher?
    I already have 2 CW single flights booked back from Dubai in Nov and can prob spend 7k over the next few months- obviously adding to the existing booking is easiest way of doing it but I am wondering about cancelling and rebooking?

    • Alex W says:

      I think the voucher has to be used at time of booking.

      If you cancel there is no guarantee that the reward seats are available for booking again. So I would book the new ticket before cancelling the old one, if possible.

      Also if you want to use the voucher for 2x single flights, I believe it can only be for 2 people on the same flight.

  • Richmond says:

    Very useful information, however you need credit card limit to cover the whole tax due, to get most of it:

    “From 1 January 2016, HMRC will limit the number of times you can use a credit or debit card within a certain time to pay your tax.

    The rules apply to multiple card payments against the same tax – you can only make extra card payments if each one’s for a different tax, eg Corporation Tax and employers’ PAYE.

    If you’re unable to pay your Corporation Tax bill in full by card, you should use another payment method like a bank transfer.”

    • Northern lad says:

      I’ve also read this but didn’t interpret it as “severely”. It does state “limit the number of times” but not what this number actually is?

      They also state “There isn’t a set limit – it depends on HMRC’s view of what’s reasonable based on payment card industry standards and guidance.”
      There are numerous types of tax (PAYE/NI, VAT, self assessment, corporation tax etc) and various payment frequencies (monthly, quarterly, twice yearly and annually).

      This could be extremely lucrative for anyone “fortunate enough” to pay lots of these taxes but credit limits, interim monthly payments to credit card company (to remain within limits) and this unknown HMRC limit could restrict/complicate things.

      If anyone can get the actual answer as to what is “reasonable”, I would be intrigued.

      • Richmond says:

        I will def. pay VAT and CT using my cards. That will be great miles and hotel points earner.

  • Matt says:

    Slightly good news for me. I’ve only got the Lloyds Duo MasterCard so slim Avios gains. But hopefully this will still be around when Curve comes to Android and I’ll pick up a BA card to hit a 2-4-1.

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