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? – March 2023 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

SPECIAL OFFER: Successfully apply for either of the Barclaycard Avios credit cards by 2nd April 2023 and you will be entered into a free draw to win ONE MILLION AVIOS! Full details are on the application forms here (free) and here (paid). This competition is exclusive to Head for Points readers. T&C apply.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

25,000 Avios for signing up and an upgrade voucher for spending £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher for spending £20,000 Read our full review

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

British Airways American Express Premium Plus

25,000 Avios and the famous annual 2-4-1 voucher Read our full review

American Express Preferred Rewards Gold

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

The Platinum Card from American Express

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

Virgin Atlantic Reward+ Mastercard

15,000 points bonus and 1.5 points for every £1 you spend 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:

Until 30th March 2023, the sign up bonus on American Express Business Platinum is increased to 120,000 Membership Rewards points – click here. The bonus on American Express Business Gold is increased to 60,000 Membership Rewards points – click here. T&C apply, see the application forms for details.

American Express Business Platinum

Crazy 120,000 points bonus (to 30th March) and a £200 Amex Travel credit every year Read our full review

American Express Business Gold

60,000 points sign-up bonus (to 30th March) and free for a year Read our full review

British Airways Accelerating Business American Express

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

Capital On Tap Business Rewards Visa

Get a 10,000 points bonus plus an extra 500 points for our readers 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.

Barclaycard Select Cashback credit card

1% cashback (3% for 3 months if you apply by 31st March) and no annual fee Read our full review

Comments (85)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • 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.

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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