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HMRC to stop accepting credit cards on 13th January – no more cheap miles

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HMRC has announced that it will no longer accept personal credit cards for income tax, PAYE, VAT or any other payments after 13th January 2018.

You can see the announcement on this page of the HMRC website.

This is clearly a blow for those people, myself included, who have been using the incredibly low fees charged by HMRC for card payments to run up miles cheaply.

It will become illegal to surcharge credit card payments from January.  Companies will have to decide whether to stop accepting credit cards altogether or to absorb the costs.  With interchange fees now capped at 0.3% under EU law on personal cards, it should not make much of a difference to retailers.

That is the theory.  In reality, card processors appear to have got around the 0.3% cap on interchange fees by inventing new additional charges for retailers.

HMRC has decided to take the first option.

What is the current position?

Until 13th January, you can continue to pay any HMRC bills by Visa or Mastercard.  The fees are generally just 0.38% or 0.41% of the amount due.  I will be doing my best to prepay my January / February VAT, self-assessment and PAYE bills before then.

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%

Paying personal tax via self assessment?

To take full advantage of HMRC’s low fee, whilst it lasts, you need a Visa or Mastercard which has a decent earnings rate.  These 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.  There is even a 33% miles bonus for the first six months.  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.  This is the card I used last January, carefully timed so that I was inside the six month period to get the 33% bonus.

The IHG Rewards Club Premium Mastercard earns 2 IHG Rewards Club points per £1, which I value at 0.8p – 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.  One problem with this card is that Tesco rounds down transactions to the nearest £8 which impacts your earnings rate.  On big payments like tax, however, it 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, unless you have a definite plan to get at least 1.5p per Avios point of value.

If you have a substantial tax bill, and would use the other benefits of the card to justify the fee, the Tesco Premium Credit Card may be worthwhile.  You earn 0.6 Avios per £1 – assuming that the fee is 0.4%? – but there is a £150 annual fee to swallow and there is no sign-up bonus at the moment.

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 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.

Paying VAT or employee NI / PAYE?

The maths is different here because the credit card fee is a deductible business expense in the same way that the fee for writing a cheque would be if you paid that way.

Depending on your tax rate – which will depend on whether you operate as a sole trader (and in that case what your personal tax rate is) or a limited company – you could be paying a net card fee as low as 0.2% – 0.25%.  This makes the deals I outline above look more attractive.

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

Corporate credit cards WILL continue to be accepted after 13th January.  However, with fees of 1.5% or more, you are unlikely to get any value from this, even after deducting the card fee for tax purposes.

January 2018 is going to be your last opportunity to take advantage of these cheap miles from HMRC.  If you are expecting to have a tax bill to pay, you may want to start making plans.

PS.  You cannot pay HMRC bills with an American Express card.  The only option is to use Billhopwhich we wrote about here – as an intermediary, paying their 2.95% fee.  This may make sense if you are a little short of the spending required to trigger a sign-up bonus.

Want to earn more points from credit cards? – September 2021 update

If you are looking to apply for a new credit or charge card, here are our September 2021 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.

The following offers will end soon:

  • 2,000 Virgin Points on Virgin Atlantic Reward Mastercard (ends 15th October)
  • 30,000 Virgin Points on Virgin Atlantic Reward+ Mastercard (ends 15th October)
  • 10,000 Avios on British Airways American Express (ends 2nd November)
  • 40,000 Avios on British Airways American Express Premium Plus (ends 2nd November)
  • 60,000 points on The Platinum Card from American Express (ends 2nd November)
  • 30,000 points on American Express Preferred Rewards Gold (ends 9th November)

Here are the top current deals:

British Airways BA Amex American Express card

British Airways American Express

10,000 Avios for signing up, no annual fee and an Economy 241 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 and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review

Nectar American Express

American Express Preferred Rewards Gold

Your best beginner’s card – 30,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

60,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Virgin Rewards credit card

Virgin Atlantic Reward Mastercard

The UK’s most generous free Visa or Mastercard at 0.75 points / £1 Read our full review

Virgin Rewards Plus credit card

Virgin Atlantic Reward+ Mastercard

30,000 points bonus and the most generous non-Amex for day to day spending 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.

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

60,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Capital On Tap Business Rewards Visa

The most generous Avios Visa or Mastercard 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:

Barclaycard Select Cashback Credit Card

1% cashback and no annual fee Read our full review

Comments (157)

  • Briandt says:

    Reading through all the comments on here, I’m really beginning to feel sorry for all you wealthy guys, worrying about the best way to pay for the best return. I guess you’ll all soon be having to pay for your own flights/hotels etc., which really will be a problem, and then what..,..
    I sat next to somebody last week, bragging about how his company paid for all his flights ,hence he was in business. So who was more ‘loyal ‘ , him or me ,who pays for my own flights ?

    • Leo says:

      Sorry I don’t get this comment. I am self employed and I pay my own tax direct to the government. That’s a real faff in itself I can tell you- as is doing my VAT which as Rob has pointed out before is actually me collecting income on behalf of HMRC. And now you want to guilt people like me for using this opportunity to buy some cheap points? I’m not rolling in cash and nor are a good deal of people here whom run small businesses. Do I spy the green eyed monster?

    • Rob says:

      Would you really prefer that your employer paid you gross and then at Christmas HMRC asked you to fill in a huge amount of paperwork before sending you a massive five figure bill? You have it easy an employee. Don’t forget sick pay, paid maternity leave etc too.

      The average self employed person earns less than the average employee. Think hairdressers etc.

    • the_real_a says:

      Can you define wealthy please?

  • Andy says:

    Cricky you guys are on a different planet to me. I’m a skilled stonemason and could only imagine paying the sorts
    of tax mentioned here.
    My last tax bill was a rebate of £10k
    I smell a lot of bravado here, “thousands of pounds” “multiple £1000 transactions” ? I’ll stick to skimming over to things relevant to my lifestyle. And if I hear one more thing abound someone’s “place in the sun”

    • the real harry1 says:

      they wouldn’t pay the tax through anything but legal necessity – this is what pays for schools, hospitals, police etc – I’m off to bed

    • the_real_a says:

      Each to their own right? I know people in the city who have “zero” lives. Simply return home at 8pm sleep and start over again working many weekends. Sure they get paid handsomely but its no life, however its their choice.

      You (i presume) have great job satisfaction, and the the flexibility to manage your own time and commissions, would you give it up for a job with a much higher salary so you could afford a house in the sun? That decision is yours entirely.

    • Clive says:

      There’s no bravado in talking about a tax bill of multiple thousands. Basic maths tells you you don’t need an enormous income to pay thousands in tax. You realise this is for people who aren’t already being taxed through PAYE, right?

  • Lee says:

    I’m looking forward to a tax bill in the tens if not hundreds of thousands!

    Shame I will not be able to pay it by card!

  • Toddy says:

    Excuse my ignorance but I have never had to complete a tax return previously.

    However, I now have a Capital Gains Tax liability. Is it possible to pay this online? (prior to the January deadline). Most of the conversation above relates to VAT, Corporation tax etc.


    • Alex W says:

      Yes should be fine. I recently earned about £500 worth of hotel points paying stamp duty.

    • Genghis says:

      Yes paid online and so as long as paid by 31 Jan following a gain from the tax year in Q, you’re alright

  • cmcbugg says:

    One other thing to bare in mind is also a rule added that you can only pay any single tax bill with ONE card. I recently tried to split a payment across two card accounts as was trying to get minimum spend award on both (IHG), and the 2nd payment would not go though.

    After about 1 week I was able to pay the 2nd part with the card – but obviously one would want to avoid being close to a payment deadline and they trying to put payment across multiple cards.

  • jonny says:

    Virgin don’t seem to be taking on new card holders. Both myself and partner applied and it said we were both innegible. My credit rating is high and haven’t been turned down for any other card.

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