Maximise your Avios, air miles and hotel points

4 WEEKS TO GO: Last chance to pay your tax with a credit card – what should you use?

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Time is running out to earn large chunks of very cheap airline miles and hotel points from HMRC via your credit card.

As we first announced in early October (but the newspapers only caught up last weekend!), HMRC will no longer accept personal credit cards for income tax, PAYE, VAT or any other payments after 13th January 2018.

This deadline is just four weeks away.  If you have any money to pay to the Revenue – perhaps your 31st January self-assessment bill or your 7th February Q4 VAT payment – you should seriously consider bringing forward your payment.

You should also consider starting to make payment now, in small chunks, as some credit card companies struggle to authorise large payments to HMRC.  £2,000 seems to be my limit which, given my VAT, PAYE and self-assessment bills, creates an administrative nightmare.

What is going on?

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

It will become illegal to surcharge all UK credit card payments from January.  Companies will have to decide whether to a) stop accepting credit cards altogether or b) 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.

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.

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.

Unfortunately, the most lucrative Visa and Mastercard products were taken off the market when MBNA closed all of its airline cards to new applicants a few weeks ago.

This is a shame, as I was particularly keen on:

The Virgin Flying Club Black Visa which earned 1 mile per £1.  Paying 0.4p per Virgin mile was an excellent result.  The same goes for the Emirates Skywards Elite card at 1 mile per £1.

The Lufthansa Miles & More Visa earned 0.75 miles per £1 – and the card was free.  There was 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.

What good cards are left?

If you are looking to apply for a new Visa or Mastercard in order to pay a large tax bill before 13th January, my preferred choice would be a hotel card and not an airline card.

The best option:

If you have a large tax bill to pay, consider the IHG Rewards Club Premium Mastercard (representative APR 41.5% variable including fee based on a notional £1200 credit limit). 

This 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 20,000 IHG Rewards Club points sign-up bonus in year one which is worth £80-£100.  You also receive a voucher for a free hotel night when you spend £10,000 so this is a good choice if your tax bill is large.

Interestingly, the points earned from the IHG credit card count towards IHG Rewards Club status.  My wife has this card and I will be putting through the bulk of my tax payments on it.

I am ‘doubling my money’ on the HMRC fee (0.38% fee to receive 0.8% to 1% back in points) and the points will go a long way to ensuring she retains top tier Spire Elite status for 2019.  Spire Elite requires 75,000 IHG points in a calendar year which is £37,500 of spending on the Premium Mastercard.

Another good choice:

If you don’t want to pay a card fee, look at the Hilton Honors Platinum Visa (representative APR 18.9% variable).  The sign-up bonus is excellent (a free weekend night for spending just £750) but so is the earning rate.

You get 2 Hilton Honors points per £1.  I value a Hilton point at around 0.33p so you’re getting 0.66p of Hilton points in return for your 0.38p per £1 of HMRC credit card fee.

Note that Hilton Honors points earned from credit card spend do not count for Hilton status.  You will, however, receive Hilton Honors Gold status for spending £10,000 on the card in a calendar year.

What are the Avios options?

The Lloyds Avios Rewards Mastercard (representative APR 23.7% variable including fee based on a notional £1200 credit limit) is one possible 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 given HMRC’s 0.38% fee.  It doesn’t make sense, frankly.  It is only worth doing if you want to trigger the upgrade voucher for spending £7000 on the card, but I imagine that is hardly a difficult threshold for anyone with a high tax bill to reach with day to day spend.

There is also little sense in using the Tesco Clubcard Mastercard (representative APR 18.9% variable) which gives 1 Clubcard point per £8 spent.  This means you would earn 0.125 Clubcard points per £1 charged which gets you 0.3 Avios per £1.  This doesn’t justify a 0.4% card fee 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 still 0.38% which I am not 100% sure about – but there is a £150 annual fee to swallow and there is no sign-up bonus at the moment. Representative APR 56.5% variable, including the fee, assuming a £1200 credit limit

If you are prepared to jump through the hoops required to get one, the HSBC Premier credit card (representative APR 18.9% variable) 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.  Representative APR 59.3% variable including fee based on a notional £1200 credit limit.  You must have a HSBC Premier current account to get these cards.

Paying VAT or employee NI / PAYE?

The game changes if you are paying NI / PAYE or VAT.  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 are running out of time to make 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.  Until 14th January, their 2.95% fee is reduced to 2.25% for HFP readers who quote the code in this article.  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? – December 2022 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

25,000 Avios for signing up and an upgrade voucher for spending £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher for spending £20,000 Read our full review

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review

The Platinum Card from American Express

30,000 points and unbeatable travel benefits – for a fee Read our full review

Virgin Atlantic Reward+ Mastercard

15,000 points bonus and 1.5 points for every £1 you spend 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 Platinum

40,000 points sign-up bonus and a £200 Amex Travel credit every year Read our full review

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

British Airways Accelerating Business American Express

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

Capital On Tap Business Rewards Visa

10,500 points bonus – the most generous Avios Visa 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 (83)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Stephen Lee says:

    Don’t forget that the Tesco debit card now offers Clubcard points and will continue to be accepted by HMRC after January.

  • Mike says:

    Hi Rob, got the Virgin black last minute as advised on HFP, principally to pay HMRC before 13th Jan. IS this the card you use?
    If so have Virgin said WHY they will not accept > 2k at a time?
    My other half who will be sorting out the payments has said that would be too much hassle for multiple payments just for a few thousand miles. I, of course, being an HFP reader woulld disagree.

    • George says:

      I believe it is risk profiling – its not that they have any policy against large transactions per-se (as far as I know) but that normal spending is drastically different to a 70-80% of credit limit in single transaction payment so it gets caught out and refused.

      I rarely have problems processing £4k on my Virgin Black / IHG Black, but anything above that and they start to get wobbly.

      • Rob says:

        Creation was worse. MBNA seem a bit better but I haven’t really pushed them beyond the £2k that I know Creation balks at.

        • Funtime says:

          I’ve been paying my self assessment in £5000 chunks per week on my IHG Black without a problem.

          £8000 credit limit on the card.

          Virgin black with a £12000 limit baulked at £2500 payments.

        • Stuart says:

          I’ve personally put £3700 on my IHG premium card without problems

        • Rob says:

          I put £13500 for my VAT tax payment on my IHG credit card (premium) which had £18k credit limit. Went through with no issues, but I did pay £6k in cash onto the card first. Will try and do similar before January deadline.

  • Mike says:

    Would it make any difference phoning them ahead of the transactions?

    • Northern Lad says:

      MBNA accept £25K on emirates against £30K limit and £15.5K on Virgin against £16K.

      Hsbc max £15K on £30K and their systems won’t allow greater, with them even advising breaking down to no more than £15K ie 2 x up to £15K works.

      If you speak to MBNA it can help but declines and fraud prevention is cyclical. Best getting the DDI for the fraud team and don’t go through the voice activated number on back of card.

      If you pay over the phone it clears down 24 hours quicker than via online, which is worth thinking about for this finite period.

      • Mr dee says:

        If you pay MBNA by faster payments it clears within an hour or so, however you can’t have more pending payments than your limit.

  • S879 says:

    OT: I need to pay off some student loan. Paying by credit card would incur fees so not worthwhile. Is Tesco debit card the best way? Need to pay off about £9000 in next 6 months so will be in instalments.

    • Polly says:

      Def the best if you don’t want incur fees…

    • Rob says:

      Yes, Tesco Debit is only real option.

      • S879 says:

        Thanks all.

      • S879 says:

        I have checked where you can’t collect points and it says on the website that there will be no points, “If you use your debit card to pay for bills at banks or other financial institutions.” I guess that includes paying for the student loan too.

  • Bob says:

    Hi, apologies if this has been covered elsewhere. Can anyone tell me if i were to apply for an Amex businesd Gold card while having a personal Amex Gold card, would i get the sign up bonus? Also, does it affect the 6 month reset of personal Amex cards?

    • Rob says:

      No you won’t, because the MR account on your Business Gold is in your name, not your company name, and so you already have an MR account. It would also impact the 6 months for the same reason.

  • danksy says:

    I’ve got £400k to pay – I couldn’t persuade the CEO to let me use my own card 🙁

  • Talay says:

    I have had a right ding dong with Barclays and HMRC over repeated refusals to process card payments and it getting flagged up as fraud. Long story short was that only a threat to sue Barclays via their Executive Office got any traction as they routinely blamed everyone else. Now payments fly though !

  • Rob says:

    It is free money! That card is no longer available to new applicants though.

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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