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.

(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.

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 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.

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  1. Oh I weep for what I’ve missed out on over the years running my own business!

  2. John Lugo says:

    Will it be possible to pay Personal tax bills with a Tesco DEBIT card after 13 January and gain one point per £8 ?

  3. Michael C says:

    Following on from John Lugo, are there any other debit cards, at least earning something, however minimal? Nothing Avios-based, I guess?

  4. Any idea if Curve is seen as corporate card?

    • By HMRC, yes. By other places, no

    • Yes by all card merchant providers!. As a retailer we would rather take Amex than Cuve as we are charged 2.2% for it!

      • Yep. This is why I usually pay with Curve when the shop refuses to take Amex! Sometimes I ask what their reason is for not taking Amex and whether they have a plan to start taking it. They say “No Amex charge too much %” then I’m like errr… they charge a lower % than the MasterCard I just paid with!!

      • RIccatti says:

        Once again, it makes sense for most retailers to subscribe to a plan that charges flat fee depending on volume, regardless what card it is Visa/MC/Amex.

        Even in this tough conditions, I avoid places that do not take cards.

    • Yes it is

  5. Really sad this easy points route will be closing. The VAT bills for my company are normally £25-35k a quarter. I recently took out the Miles & More card just before it got pulled, so I’ll be putting as much of my Q4 VAT return through that as possible before 13th Jan.

    Beyond 13th January, I’ll likely use my Starwood Amex via BillHop to pay HMRC at a 2.5% rate. Once the fee is deducted as a business expense it’s obviously not as great as things have been but still worth while.

    • So, is this real? If I will pay 10k VAT using Billhop I can expense those £250?

      • Of course you can. It is an expense “wholly and exclusively” incurred in the operation of your business.

        I charge my Amex Plat £450 membership fee to HFP, and as long as I only use the card for HFP transactions all is fine. I would only have a potential problem if I also put personal transactions through the card.

  6. Northern Lad says:

    You can overpay HMRC bills by card.

    The overpayment will then be refunded electronically to your bank and the original card transaction remains. This normally takes a couple of weeks.

    If cashflow permits a last chance of buying cheap miles irrespective of tax liability.

    • HMRC only refund automatically with self-assessment and income tax.

      PAYE and VAT is a different story.

      Are DVLA still taking cards? What makes them different from HMRC when it comes to the “european rules” excuse HMRC are using for stopping payments by cards?

      • Do you know what the situation is with VAT overpayments in that case? Would they just hold it and put your VAT account in credit?

        • Yes stays in credit.

          I paid my PAYE to VAT by mistake.
          Got nasty letter from PAYE.

          once you’ve overpaid you,ll see it sitting in your Account when you login.

        • Ok great, I’ll overpay then! If I can spare the cash I’ll try and cover roughly the 2018 Q1 VAT return!

        • They don’t refund it unless you phone them up or if you file an amount where they owe you.

    • They’ve wised up and are starting to issue them back to the paying cards now – be careful! We had a corp tax refund (not overpayment) and despite our instruction they sent it back to the payment card we used four months prior, leaving me with a card £11k in credit. Payment management isn’t universal so it probably isn’t all departments yet but don’t count on an easy recycle.

      • If you file a return where you are due money they will refund you but if you owe money then an over payment seems to stay on the account.

    • e.thomas says:

      When my tax was reassessed ( I had been substantially overcharged) HMRC sent my refund back to my Miles and More card. Really annoying. When I complained they refused to budge.

  7. Off topic as no bits

    Amex offer £100 off a £149.99 spend at naked wines, no need to join their club in previous years, should stack with a money off voucher as in previous years, this one usually gets pulled quickly. Wine is usually ok and may get here in time for Xmas

    • Update – it’s a voucher code this time so won’t stack with other vouchers. Will have a look at lunchtime and see if there’s any good value cases.

    • Looks like it can be used on any Amex, not just the card on which the offer is shown, as it’s accessed by means of entering a code on Naked website.
      However, for me:
      “Hello again! You’ve used a voucher with us before and unfortunately they are limited to one per customer”
      T&Cs state “valid for new Customers”, but I signed up to their wine club for an introductory offer previously. Could probably get around this be using different email address and/or tweaking address details.

  8. I take it I can just send HMRC a payment before I’ve finished my tax return?

  9. I am wondering can I get the IHG Rewards Club Premium MasterCard if I already have their IHG Rewards Club Card and will the 20,000 bonus be valid?

  10. OT (no bits today) – I have a Fenwicks £10 off £40 and HoF £10 off £70 offers available. does anyone know if they work with buying gift cards?

    when you dig into the full T&C’s it says not but as we all know T&C’s are often at odds with what actually happens.

    • johnny_c-l says:

      They do, Amex only see the £X spend from the merchant and don’t know what was bought.

      • Thanks Jonny will give it a go. I suppose work case scenario is I still end up with a couple of gift cards that I can use anyway

        • Whilst it took quite a while to get the credit, I got £30 for a £100 in-store Harrods gift card purchase on my Platinum card following the recent offer.

          The only risk with these deals is buying a gift card online, because the transaction is often processed by a third party gift card company.

        • Harvey Nichols online is fine, £30 credited back next day.

    • Check all your cards. I had the HOF £10 off £70 on one, thought it a bit stingy, and found £10 off £50 on the others!

  11. What's the Point says:

    Will HMRC accept Bitcoin!

  12. Graham Walsh says:

    OT – anyone else seeing Award Wallet on iOS not updating? I have to go into each account and update manually

  13. Michelle says:

    Another OT (sorry!) – I have now had numerous shops listed but not participating in shop small. I’m going to call up AMEX to attempt to claim back my £5’s for my platinum card but would they deal with claims for my MBNA and LLloyds issued AMEX’s or do I go through their customer services? Thank you.

    • You can also do it through online chat on their website.

    • You have to contact MBNA and Lloyds separately

    • Michelle says:

      Managed to get 3 x £5 back from Amex and Lloyds but no joy from MBNA. Surprisingly Lloyds were by far the easiest to get the credits from. Thank you for your help!

  14. richard lander says:

    is the mbna american ailines a good deal for tax payments?

    • Yes – 1.25 miles for 0.38p is exceptionally good. Should really have added that one in, except very people have it as it was only available for 6 months or so.

  15. Richard G says:

    So gutted I only just found out about this. So many points lost over the years. 🙁

    I’m planning on using my MBNA Visa. Will get me 1 “reward point” per £1, which after it all shakes out and you get a reward voucher (Sainsburys / Argos) seems to work out at about a 0.5% return. Not brilliant, but better than nothing.

    My other option is my Tesco Clubcard Mastercard, but by my calculations, that works out at about 0.3% (at least when rewarded as avios valued at 1p each).

  16. I’ve not usually had a problem paying over £10k with a card – so not had to break it down into smaller chunks. However recently I wanted to split a payment over two different IHG cards. This was a problem because HMRC only allow ONE payment by card for a specific tax bill within a certain time period (at least this was my experience for corporation tax). I was unable to pay the second chunk the same day, or the next day. I tried again about a week later and it went through, so not sure what the time period is — but in the run up to this deadline people might want to be mindful of paying in chunks.

    • I’ve not experienced this – I routinely split payments across multiple cards. Where did it stop you?

      • It just comes up not authorised at the end, a small amount of multiple payments in the same day worked for me however.

    • Yes, just not authorised on the second payment. I phoned the bank thinking it was a problem with them, but they didn’t see any declined transactions so it was HMRC side.

      It is also stated on their website “Making more than one card payment
      HMRC limits the number of times you can use a credit or debit card within a certain time to pay your tax.”

      As I say, my issue was corporation tax, maybe different taxes have different results.

  17. 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.

  18. 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.

    • 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.

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

        • 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.

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

        • 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.

  19. 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.

      • 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.

  20. 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.

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