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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)

  • Talay says:

    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.

  • 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?

    Thanks!

  • 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.

  • The_real_a says:

    Most card companies will allow you to change your billing / statement creation date once every 6 months. I have all my 10+ cards due on the same date each month.

  • 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?

    • Rob says:

      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.

  • Paul says:

    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

    • Ian says:

      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

    • Paul says:

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

  • 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.

    • Rob says:

      There isn’t even a badly earning Business Visa or MC out there that I know of ….

      • Will says:

        true.

      • Axel says:

        Ehhhhh?

        Curve is definitely a business card issued through Mastercard. Whether it is a good or bad one is open to readers interpretation.

        I’ll make a payment on Jan 14th to HMRC. Who here thinks it will process?

  • MarcB says:

    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!

    • Rob says:

      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.

        • Fenny says:

          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.

      • Mr dee says:

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

    • Polly says:

      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!

    • Alan says:

      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.

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