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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? – August 2021 update

If you are looking to apply for a new credit or charge card, here are our August 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. Here are the other top current deals:

British Airways American Express card

British Airways American Express

5,000 Avios for signing up, no annual fee and a companion voucher for spending £20,000 Read our full review

BA Premium Plus American Express card BAPP

British Airways American Express Premium Plus

25,000 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 – 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

Virgin Rewards Plus credit card

Virgin Atlantic Reward+ Mastercard

15,000 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

Earn both Avios and BA On Business points with your business spending 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)

  • Nick M says:

    Thanks for the heads up!

    Another option would be using the Tesco debit card for 1pt/£8 going forwards. – I don’t think it is treated as a “financial transaction”?

  • Roger says:

    Is there any “hope” that billhop will drop their service fees to more palatable level (at least for MC/Visa), which we can use post 13-Jan for HMRC bills?

    Rob, would you be in position to reach out to Billhop in this regard?
    I am sure there will be a massive business Billhop from get us as a collective readership of HFP is very strong in numbers!

    • Lev441 says:

      Not a bad idea… but I can’t see bill hop getting down to levels like HMRC – would need to be below the corporate credit card rate of 1.5% to even think about being worth it.

  • Lev441 says:

    This is heartbreaking news, I’ve done very nicely out of this since I started my business 4 years ago.

    I had a feeling however, that this would be the case.

    Is there any issue in paying a lump sum of taxes (I.e. years worth of VAT) before the rules change?

    • Genghis says:

      Bear in mind cost of capital for such a little gain.
      @Raffles so your prediction was right! At least now us employees have less chance to get jealous.

      • Lev441 says:

        Hmmm I guess so, just depressing that the next best option is a lot worse at 0.3 points (avios using Tesco card) per mile vs 1 point per mile currently using my MBNA virgin black. It’s really the only reason I have kept the card for a new card year (only renewed last month)…

    • Gary Barlow says:

      Heartbreaking? Really?!! In the whole scheme of things maybe air miles will start to be awarded again for doing just that – flying miles in the air!! And heartbreaking can be left to the mid 1990s when Take That split up. Now that was heartbreaking 🙂

    • Rob says:

      You can do, but it will be refunded – they don’t do prepayment.

      Of course, getting a cheque refund is not a disaster …..

  • Daniel says:

    I used my Tesco debit card to pay HMRC earlier this year….1 clubcard points for each £8….and for no fee….might be a winner for some…

    I opened a Tesco account for the 3% on 3k savings and the above earning. For higher spend tax payers this might be a good reason to open an account after this ship sales.

  • Dan says:

    Could someone pls clarify whether the 0.3% fixed interchange fee is the same as the 1.5% to 2.5% fees that retailers would get charged by visa or MasterCard or a higher rate by Amex?

    • John says:

      Interchange is the fee between your bank and the merchant’s bank. The merchant’s bank can charge the merchant whatever they want. It can be lower than 1.5% and Amex can be cheaper than visa/mc.

      • Rob says:

        Tesco will pay 0.3%. Your local mini-mart will be 1.5% due to ‘taxes and charges’ to cover terminal rental etc.

        Eventually iZettle etc should compete down pricing to nearer 0.3%.

        • W says:

          What is izettle? Is there some earning opportunity through it?

          • Rob says:

            It is a card reader you plug into an iPhone and which lets you take credit card payments. Costs £29. Great for plumbers, music teachers etc. They are very good at spotting MS, however, so don’t think you can buy one and put through a pile of charges for yourself!

          • Alan says:

            Thankfully not iOS only, works perfectly with Android too. Also has Bluetooth so you don’t need to plug it in. Fantastic for taking extra payments at events, etc. Fees start at 3% and reduce depending on monthly spend. Takes everything incl Amex, Diners Club, etc. Was used by almost every food truck at the Edinburgh Festival this year!

  • Kevin says:

    Has anyone tried using Curve? Does it work?

  • rob says:

    So the EU trying to protect consumers but actually reducing choice for us.

    Sounds a bit like MIFID 2.

    Politicians need to realise that sometimes markets fail because of govt interference.

  • SB says:

    Apparently, when you go through the payment system, if you type in the first 4 digits of a cheap 0.3% VISA it will confirm to you the cheap fee. If you then change the 16 digits on the next page in favour of a (better earning) but more expensive 0.6% MasterCard, it still processes the transaction on the cheaper VISA % rate. So somebody told me.

    • Polly says:

      Somebody did briefly refer to this process last year, when this was first discussed. It’s a blow for people meeting spend targets tho…apparently it does work. We haven’t personally tried it yet tho…but will for my council tax this year !

    • Danny says:

      Yes, that will work after a fashion. But I don’t think you can switch between Visa and Master. If you type in the first 4 digits of a Visa, my experience has been that you’ve got to use some kind of Visa card (but not necessarily the one with those first 4 digits) for the final payment.

      • Polly says:

        Interesting, thanks for the clarification…l was thinking, starting with a visa debit, and continuing with my elite MC….aw well,..

        • SB says:

          Yes, you have to stick on same regime (credit to credit) but change cheap to expensive Mcard or Visa

    • RussellH says:

      In my experience HMRC does not quote a cost figure until yopu have entered 8 digits, which surprised me since everything that I have read tells me that it is the first 6 digits that describe the card scheme.

      However, Creation’s IHG card is more expensive than thier Marriott card, and these only differ in the 8th digit.

      And since the Marriott card would normally be my first choice for this anyway…

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