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 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 …..
Thanks to Chris.