Nutmeg Avios

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

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.

HMRC logo

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.

Thanks to Lewis for this.

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 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.)

Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points and do not consider interest rates, service levels or any impact on your credit history.  By recommending credit cards on this site, I am – technically – acting as a credit broker.  Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as a credit broker.

Bits: Travelex / Avios reminder, 20% bonus on transfers to Etihad, £4 Manchester passport control fee
Bits: Rolling Luggage winner, Avios via Charles Tyrwhitt sale, your new bedtime reading
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  1. That’s the end of my Spire status. I’m perilously close to packing this hobby in.

    • I am actually in the process of paying the July-Sep VAT and PAYE bills on my wife’s new IHG card in order to get her over the line for Spire next year (and pick up the 25,000 bonus points).

      Not sure how I will do it next year. Perhaps I see how much I can get through between 1st and 13th January given my self-assessment bill will be due.

      • Be a push to get many payments through with creation in that short period.

        • I know ….

          Actually, I presumably have longer than that – I can start charging as soon as my previous statement cuts off in December, because the spend miles won’t post to IHG until January and so count for 2019 requalification.

        • Smart move there and thanks for be tip, deciding between ASDA and ihg cards to use :/

    • +1

  2. Jonathan says:

    A bigger question, surely if HMRC (aka the Government) cannot make the interchange cap work then why would any mere mortal and smaller fish try and absorb it. Are we seeing the end of the credit card as we know them?

    • Cash handling isn’t free. Banks charges shops for paying in cash. You need staff to walk it to the bank, possibly with a couple of burly companions.

      • And banks actually charge you for paying in and taking out so that to exchange say notes for coins, you have to suffer their charges twice !

        I am lucky that I have large credit balances which I leverage to get all charges refunded but if you were a traditional small retailer with semi permanent borrowings, then you could find yourself hammered both sides with no way to get out than to switch banks, which is hard to do when you are essentially using the bank’s money to finance your business.

    • RussellH says:

      Most UK businesses have been taking credit cards for decades; HMRC has not, as far as I know. Cash handling and cheque payments also incur fees, which may, in the future, get adjusted upwards

      Different businesses will have done different calculations to see what works for them. And there are different scenarios in different countries too.

      This summer was the first time that I noticed significant numbers of ordinary shops in Germany taking credit cards – the rule used to be German issued debit cards only, because retailers were charged the same for a non-German debit card as for a non-German credit card (it has worked the same way here too). I suspect that German card firms have been forced to slash their fees by the imposition of the interchange cap and are now finding that as a result they are getting much more business!

      Of course, in Germany one big stumbling block to credit card payments has been the unwillingness of large numbers of people to incur what they see as debt, rather than deferred payment, which will be how most people on this site will see their card payments.

      • Michael Jennings says:

        Germany was always a country that loved to use cash. That has taken a long way to go away.

        I’m finding I am using a lot less cash than I was a couple of years ago, and that this is the case *everywhere*. The most extreme cases are the Nordic countries – where I don’t even bother getting any cash – but I am also finding that a couple of hundred euros from an ATM will last me for three or four trips to the euro area, as everything else is just going on cards. I’m also using very little cash in the US and Canada, and hardly anything at home. Even in India I used surprisingly few cash rupees.

        • I stopped using coins about a month ago, as an experiment. All fine except for getting stuck outside the loo at Kings Cross, short of 30p! My trousers look better without a pile of coins weighing down the pockets. I recommend giving it a go, unless you are buying newspapers off kiosks in the morning (and those guys will have to shape up soon).

          Not a good future for Big Issue sellers though, and I had to disappoint a charity collector yesterday.

          I still keep a pile of notes but these mainly go to our cleaner!

        • Singing Dwarf says:

          Rob – you didn’t say that you stopped using notes, so why was the charity collector disappointed!?!

        • Janeyferr says:

          The Big Issue seller outside Sainsbury’s in Cambridge takes cards. Not sure if he accepts AMEX, though.

        • BlueThroughCrimp says:

          Rob, nip across to St Pancras to stay coin free – those toilets don’t charge!

        • I snuck back into the First Class Lounge in the end – it was in the process of closing but I nipped in as someone else was leaving ….

  3. Paul Lister says:

    Darn. There goes 100k miles p.a.

  4. Prepare for a glut of travel related products losing the ability to pay by credit card (especially AMEX) – it’s the industries biggest talking point at the moment as it’s hit by the double whammy of the highest fees and lowest margin.

    • Very unlikely – because the general public is wary of travel companies going bust, and therefore knows they need to pay with a credit card. It would be a major loser of business for a tour operator to stop accepting credit cards. BA could get away with it, but after Monarch I reckon any other airline would be treated sceptically.

      • RussellH says:

        Nevertheless, Sam is absolutely correct, loss of the ability to charge credit card fees IS a massive issue at present.

        Rob, you are correct as far as airline tickets are concerned, but for tour operators, who have to protect client monies anyway, there is no need at all for credit card protection.

        There were huge figures bandied around in the Sunday papers about the cost to the taxpayer of the Monarch repatriation exercise, but the CAA will be chasing credit card companies for as much of that cash as they can.

        At present travel is not a good place for credit card companies because the CAA/ATOL, Financial protection insurers and operators of trust funds all see the credit card companies as a source of funds to reduce their own losses, resulting in hefty card fees to travel firms being levied by those merchant aquirers that are prepared to deal with travel. Many merchant aquirers refuse to deal with the travel sector, forcing the business into fewer hands and pushing up the cost of accepting credit card payments.

        • That is true, but whether the public sees it like that is something I doubt. They would expect to pay by card. For better or worse, a lot of people will also run a balance and incur interest whilst paying off their holiday and would not have the money in the bank to settle with a debit card.

        • Credit card companies hold back cash until the passenger has actually flown in order to protect them should they need to pay out a s75 claim. Monarch’s balance sheet (as at oct 16) had c£50m restricted cash i.e. Cash that had been held back by cc issuers. I assume that the CAA will want a share of that money

      • It’s not very unlikely – it’s happening – in terms of American Express anyway which is your primary focus here. I know of big companies who will silently be dropping it as they charge considerable more. We’re mulling it over. I don’t think anyone will eradicate all credit cards but I guarantee every legal loophole is being explored to find discounts for those not paying by CC (bit of a brick wall at the moment).

        The rescuing of non-ATOL bonded Monarch customers has infuriated the industry, and rightly so. They are already counting the cost of the hundreds of thousands in CC surcharges they will be losing due to the early implementation of the eradication of charges. Expect a few waves!

  5. The Marriott Mastercard is taken as the lowest charging according to HMRC and the table Rob posted:

    MasterCard World Premium Credit Card 0.374%

    • RussellH says:

      But strangely the IHG M/card, which is the same as the Marriott one for the first 7 digits, is more expensive.

  6. Andrew Holden says:

    Hi Rob, does this affect the HSBC Premier World Elite Mastercard?

    The use of the expression ‘personal credit card’ and your highlighting of the personal Visa and Mastercards in the list might give the impression that the premium cards, where HMRC charges the 0.606% fee, will not be affected?


  7. jim cleaver says:

    This is devastating news for me, each year through my business i manage about 500k AA miles via HMRC, loved the flexibility of using them on Etihad as well as an often cheaper reward chart for one world. Mind you, as one door closes i’m sure another will surely open, I remember thinking it was the end of the world when the Tesco Baby Club gravy train stopped, something new always seems to come up.

  8. Tony Burns says:

    Mwmo to self pay my tax before end of Jan as usually leave until very last day!
    Thank you for highlighting charges are deductible as need to check that my accountant has done so.
    Anybody know ow if the can be reclaimed in arrears?

    • Realistically …. if you make an adjustment for prior year expenses missed out by simply whacking them through the current year (as opposed to refiling the earlier years) then – whilst strictly not right – you aren’t actually ripping anybody off. HMRC will be secretly grateful you aren’t causing them grief via the refiling process.

    • Genghis says:

      As Rob notes, just expense in current year. Not likely material.

  9. O/T – I currently have a BA Premium Plus card.
    Going to apply for the Preferred Rewards Gold Card for the bonus and close it.
    Will I still get the bonus despite already having the BA Amex Plus card? Have had it for about 2 years now

    • Yes you’ll get the bonus. Holding an Amex BA credit card won’t stop you getting the bonus on a Gold Charge Card. Get a referral link from Rob and you’ll get an extra 2000 MR Points

    • Yes, as long as you don’t currently hold any other card earning AMEX membership rewards points then you’re fine.

  10. William Avery says:

    Why isn’t there a decent earning Business MasterCard/Visa out there? If Amex do one don’t see why there couldn’t be a £1 per point card.

  11. Wondering if Rob has ever considered a HfP forum in lieu of post comments – so much interesting discussion each day, but it’s getting increasingly difficult to follow!

    • 1. Advertisers won’t pay a premium to be alongside forums (lower quality, people skim)
      2. Needs moderation (which, realistically, would need paying for, probably via a bunch of guys in Mumbai) particular over libel issues
      3. Very difficult to get a blog and forum to work together, almost no successful examples
      4. Heavy server drain and hard to move if we change the site format / design

      • Richard says:

        this though is one of the few posts where the majority of the comments are relevant to the topic being discussed. Normally at least half are O/T comments with people who want to discuss something not related to the blog post at all. I’d like voting buttons on each comment to identify the OT posts and a setting to be able to ignore them.

        • I’d like voting buttons as well, but I’m not bothered about the OT stuff – I just skim that. Some people are just rude or irritating. Once we get into the realms of voting people off, we may as well just give up.

        • the_real_a says:

          As long as we can also have voting buttons to avoid all the comments complaining about OT comments.

      • Very true, forums can easily lose focus where the blog keeps its focus

    • Marc,
      Sorry you find it hard to follow, but so glad you find it interesting. Nice to hear a positive comment about OT, but mostly folks here try to be helpful, and share their experience to help newbies along. Keep reading!

    • He has and thankfully isn’t planning one – I find it enough keeping up with comments on the main posts. Flyertalk is a good place to go for extensive travel-related forum chat.

  12. 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 ?

    • 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?

    • 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?

  13. 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.

    • 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?

  14. 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!

  15. 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.


    • 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

  16. 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.

  17. 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.