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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.


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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

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Earning miles and points from small business cards

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Capital On Tap Business Rewards Visa

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Comments (157)

  • pointsarb says:

    Does anyone know the max amount you can pay HMRC online per transaction? Is there a limit per transaction?

    Thanks!

    • Rob says:

      It is down to your card company. I struggle to get more than £2000 through at a time, often only £1000, which means a ludicrously huge number of transactions.

      • pointsarb says:

        Cheers Rob/Gulz.

        • Rob says:

          This is Creation and MBNA by the way. You may have more joy with Lloyds or Barclaycard.

          It is massively frustrating because – security-wise – it should be obvious that a) I have made a lot of previous payments to this merchant and b) HMRC should be flagged in a way which tells the card issuer this is very unlikely to be fraudulent.

      • Mr dee says:

        Agree, there is also a card limit based on a timeframe unsure the exact details but they will just decline automatically

      • the_real_a says:

        If I get a large transaction declined, I will usually phone the credit card company and pass the security checks and have the transaction authorised. I can then make the payment again without issue. The advantage is that the companies security algorithm then has extra data that transactions of this type are “normal” and will likely be approved automatically next time. Its not normally possible to approve in advance of the first decline, as they need the exact coding of the merchant to process the override.

        • Mr dee says:

          Doesn’t seem to work with mbna for me phoning up

        • the_real_a says:

          MBNA have a strict £2999 limit on all online transactions (for myself and everyone i know!)

        • Fenny says:

          I rang MBNA today to get them to authorise a £5k payment. They told me it would be fine to do after 1 hour. 3 hours later, the transaction was declined and my card was blocked. Of course now I can’t do a bl**dy thing until security are back tomorrow.

    • Gulz says:

      I pay VAT to the tune of £7500 in one transaction. Never had a problem

    • jim cleaver says:

      I have just paid a vat bill in 2 transactions, £31k, then another £24k the following day. Both went through without any hiccups.

      • Rob says:

        On a credit card, or a debit card? A debit card will clear immediately.

        • Mr dee says:

          I could use Barclaycard and a large payment would go through but Creation especially doesn’t let me do more than 1 payment a day easily

        • Tom C says:

          I regularly put through £20k a month on an HSBC World, with my highest being over £100k. Never declined, unless I happen to be abroad whilst doing the payment.

          So much for that.

        • jim cleaver says:

          on my aa mbna card

  • Ian says:

    This is a massive blow 🙁

  • Gulz says:

    According to my accountants, credit card fee is not deductible because HMRC gives you ways to pay the tax without incurring any extra fees – so using a personal credit card to pay the tax bills is a personal choice and not tax deductible.

    • Will says:

      I think that’s harsh, as long as the fee is reasonable (as it is here) you should be ok.

      You could even demonstrate a personal fee to be cheaper than business card and argue that you wanted the flexibility of having access to funds in the bank account while the cc due date came around.

      • Rob says:

        You need a new accountant. This guy is making fun of you. If he is not showing you deductible loopholes which are greater than his fee then he is a waste of space.

        If you wrote a cheque, the bank charge would be deductible. On his logic, if you took a taxi to a meeting which was actually in walking distance then you shouldn’t claim for the cab, and if you buy a fancy laptop rather than a £199 Currys special you should only deduct £199.

        • AAlsc says:

          Agree 100%. The accountant is talking rubbish.

        • Gulz says:

          Yup, am quite frustrated with my accountants… been meaning to change accountants for a sometime now, but this is just one of those things that I can’t be bothered to do, but really should.

    • Genghis says:

      Only a requirement for it to be “wholly and exclusively” (not necessarily) for CT and IT (trade) purposes.

      • Howard says:

        For an employee the requirement is wholly, exclusively and necessarily in the performance of the duties of the employment. For a sole trader or company the requirement is wholly and exclusively.

    • Mr dee says:

      If it’s your business then it’s up to you where you spend the money, in some circumstances you may not be able to claim against taxes but some accountants take it too far just to be safe.

    • Lady London says:

      what happened to “wholly and exclusively” a business cost even if not “necessarily” a business cost? if it’s a fee incurred to make a business payment then what it is it should be deductible. The only way to question it would be if the fee is such a huge amount more than the minimum charges you’d have had to pay, that it could be questioned that the transaction was not really made for business purposes and that is not the case here.

      I’d challenge my accountant on that if I were you.

  • Gulz says:

    My best points earnings was with HMRC a while ago when I paid my VAT using the Supercard (Visa – the trial one) linked to Curve which was in turn linked to my Virgin Black Amex. Admittedly I was only able to process £3000 this way, but it was 6000 miles at no cost!

  • Leo says:

    That’s the end of my Spire status. I’m perilously close to packing this hobby in.

    • Rob says:

      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.

      • Mr dee says:

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

        • Rob says:

          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.

        • Mr dee says:

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

    • Tracy says:

      +1

  • 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?

    • Rob says:

      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.

      • Talay says:

        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.

        • Rob says:

          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!

          • Rob says:

            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 ….

  • Paul Lister says:

    Darn. There goes 100k miles p.a.

  • Sam says:

    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.

    • Rob says:

      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.

        • Rob says:

          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.

        • Howard says:

          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

      • Sam says:

        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!

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