Maximise your Avios, air miles and hotel points

Got an SME? American Express will pay your wage bill, HMRC and rent for a fee and give you points!

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American Express has launched an interesting new service, the Premium Rewards programme, for anyone running their own business.

It is a little like Billhop, but cheaper.  What is odd about it is that at no point does any money pass through your card!

Premium Rewards can be used to pay, and I quote:

PAYE

HMRC

Non-accepting merchant and supplier payments

Where your current credit limits are restricting you

Rental fees and business rates

Put very simply, this is how it works:

You go online and tell American Express where it should send money, and how much

American Express takes the money directly from your bank account

American Express makes the payment

American Express charges you a fee of between 1% and 1.25%

You earn 1 Membership Rewards point per £1 sent

American Express Premium Rewards

And the point of Premium Rewards is …..?!

I know what you’re thinking – why would anyone want to do this?

Fundamentally, you are paying American Express 1% to 1.25% to do something that you could just as easily do yourself.  There aren’t even any cashflow advantages as American Express takes the money off you immediately.

All you are doing, in effect, is buying Membership Rewards points for between 1p and 1.25p each.

But HFP says that Membership Rewards points aren’t worth more than 1p?

That’s true.  If you look at our article on ‘What is a Membership Rewards point worth?‘, you will see that it isn’t easy to get more than 1p for them.  In most cases they are worth substantially less.

Only airline miles, and potentially Radisson Rewards transfers, get you 1p or more of value.  Even then, you need to know how to redeem those airline miles strategically to get over 1p.

American Express Premium Rewards

If I can’t get more than 1p per Amex point, why would I want to pay 1.25p?

It’s a tax arbitrage, that’s why.  This is the genius of the American Express Premium Rewards programme.

My marginal tax rate on HFP is roughly 50% including National Insurance.  This means that any cost I can charge to the company is reduced by 50%, since the cost reduces my profits by an equivalent amount.

Let’s look at the maths from the point of view of a small business owner:

You pay American Express Premium Rewards £230 to pay your £20,000 quarterly VAT bill

The £230 is a business expense and so is charged to the company.  It reduces taxable profits by £230 which, for someone paying a 50% combined tax and NI rate, means the real cost to the company owner is only £115.

The company owner receives 20,000 Membership Rewards points

If these were transferred to Avios, the company owner has ‘bought’ 20,000 Avios (1:1 transfer rate with Membership Rewards) for £115.  This is an exceptional deal.

Note that only some payment fees can be written off against tax.  VAT is fine, as are payroll and employee NI costs, as these are payments made by company itself.   Corporation Tax would also be fine.

You couldn’t write off the cost of paying HMRC your self-assessment bill for self-employment or company dividends, because those are personal payments.

What does American Express Premium Rewards charge?

The fees are on a sliding scale:

Payment under £10,000 – 1.25%

Payment of £10,001 – £100,000 – 1.15%

Payment of £100,000+ – 1%

Payments can be batched to reduce the fee.  If you want to pay your staff using Premium Rewards, for example, the 1.15% band would apply if the combined total sent on payday was over £10,000.

American Express Premium Rewards 2

What American Express cards can be used with Premium Rewards?

The exact wording is:

Your card must be issued in the UK

Your card cannot be a Cashback card

Your card cannot be a co-branded card

The 2nd and 3rd points make no sense, because Premium Rewards only issues Membership Rewards points and so you obviously can’t link it to cashback, co-brand or indeed any other card which doesn’t issue Membership Rewards points.

American Express seems happy to credit the points to a personal Membership Rewards card account but the payments for the service need to be made by a business and – in theory – Premium Rewards should only be used for business payments.

Is Amex Premium Rewards worthwhile?

For some HFP readers who run small or medium sized businesses, the Amex Premium Rewards programme will be an outstanding opportunity.  It is especially good for anyone paying six figure bills on a regular basis, since you would benefit from the lowest 1% fee band.

You also need to be paying a high level of personal tax in order to make the tax arbitrage work.

Is it worth paying 1.25% to pay a £5,000 bill (£62.50 fee) if your marginal tax and NI rate is only 30%?  Just about.  You are paying (£62.50 – 30%) / 500000 = 0.875p per Membership Rewards point.  0.875p per Avios certainly isn’t bad.

Is it worth paying 1% to pay a £100,000 bill (£1,000 fee) if your marginal tax and NI rate is 50%?  Absolutely.  You are paying (£1,000 – 50%) / 10000000 = 0.5p per Membership Rewards points.  0.5p per Avios, or whatever you choose to use them for, is a great deal.

Owners of smaller businesses should look at Curve Metal.  Curve Metal has a £180 annual fee and allows you to charge £50,000 per year of HMRC payments to any Visa or Mastercard you wish, for free.  This is just 0.36p per £1, which could mean very cheap miles or points if you linked it to a suitably generous Visa or Mastercard.  This HFP article explains how Curve works.

There is also Billhop.  Billhop works slightly differently to American Express Premium Rewards.  It allows you to pay any bill with an American Express card in return for a 2.95% fee.  Billhop makes the payment via bank transfer and recharges your American Express card, coding it as a purchase.  The snag here is the 2.95% fee.  It means that Billhop only really makes sense if you want to trigger an Amex sign-up bonus or your British Airways American Express 2-4-1 voucher.  You can learn more about Billhop here.

How do I sign up for Amex Premium Rewards?

There is no online sign-up service.  You can download the two Premium Rewards brochures (PDF) here and here.  These include a form that you can send in, or alternatively you can call to register.

This is a new service and I have zero feedback so far from users.  If you sign up, let us know how it goes.

Comments (39)

  • memesweeper says:

    I’ve had no less than three calls from Amex to promote this! They must be keen 🙂 they mentioned ‘payroll’ on the phone but did not stipulate if that would ex/include the business owner. A previous run-in with Amex for a (legitimate) payment made from me to my own firm with an Amex would make me wary of sending myself a payment for expenses, PAYE or dividend using this system. Has anyone asked Amex about this?

    As for the legitimacy of the scheme without any credit facilities, for non-FX payments, I have my doubts. But I suppose one could argue, if their portal is good enough, it was easier to manage than the banks own payment system. In the case of HSBC I’d say that’s likely worth 1% a month.

  • ILikeThis says:

    Use this to top up Paypal

    Cost 1.15% to put money onto paypal.

    Use Paypal Master card to pay off CC Bills/ HMRC and get cost down to 0.65% per membership mile.

  • Jono says:

    I don’t understand, why is this of benefit in reducing the tax bill of the company?
    Aren’t all payments out of the company deducted from income which results in the gross revenue figure which is then taxable?
    Income – Costs = Gross Profit – Tax = Net Profit
    Whats the benefit of using a new route to paying the costs?

    • Rob says:

      The Amex points are worth far more than the Amex fee, because of the ‘tax shield’ on the fee.

    • Ian M says:

      Say you have a company that makes £10,000 profit a year.

      You have a £100,000 supplier bill to pay.

      You decide to use the Amex Premium service to pay the supplier the £100,000. Amex charge you a 1% fee (£1,000). You therefore have the £100,000 supplier bill as an expense + the £1,000 Amex fee as an expense.

      If the company had paid the supplier directly and not incurred the £1,000 Amex fee, the company profit would be £10,000 with a resulting 19% corporation tax bill of £1,900.

      If the company did use the Amex service to pay the supplier and thus incurred the £1,000 Amex fee, the company profit for the year would be £9,000, with a resulting corporation tax bill of £1,710.

      The company corporation tax bill would therefore be £190 lower

      • TGLoyalty says:

        Exactly and to Rob personally as director he would then have to pay tax on any Dividends or if he chooses to withdraw as wages any NI+Income tax.

        I think you could still come out 10-20% ahead with zero risk which isn’t bad at all since the best you’ll get from a bank is about 1%

      • Jono says:

        OK this makes sense if you’re gaining 100,000 points and a reduction in tax of £190 vs the alternative of a £1000 gross dividend (net of 32.5 to 38.1% tax = £675 to £619)

        Thanks all!

  • James Hadley says:

    Rubbish compared to Curve Metal. Billhop will also lower your fee substantially for Visa and MC if you put enough volume through and ask nicely.

  • Tracy says:

    I just rang to try an apply but they weren’t interested due to the small amount of money that we would put through this. told me to wait until I reached a larger turn over.

  • The Savage Squirrel says:

    Marginally worth it on pure reduced tax liability terms for a small business
    However, the cashflow effects of paying immediately vs 40 day or whatever credit card terms means a typical small business owner would need to tie up a large amount of extra capital in the business (which then cannot work/earn elsewhere – even if you assume VERY CONSERVATIVELY that it would work doing nothing more than earning 1% tax free with Ernie and friends!)
    Once you put the liquidity/capital issue on the scales this definitely falls into the not worthwhile category.

    • Guy Incognito says:

      Really? My business has cash in the bank, but doesn’t have access to overdrafts or credit cards.

      The sort of sums involved would require us to have a large overdraft / credit card facility, and then be able to make overseas payments using that facility (presumably charging us a fee or a bad rate).

      If I can accrue a few million Avios points per year while reducing my tax bill I’m going to do it!

    • Ilikethis says:

      Not sure it ties up captial as you can use this to pay of credit cards can you not?

  • Talay says:

    Is the maths right ?

    I don’t see how you think a company has a marginal tax rate of anywhere near 50% when corporation tax is only 19%. This cannot save on VAT as that is on sales, not profits.

    If you are including taking dividends above the circa £40k 7.5% rate then ok, it may have additional merit there to avoid the 32.5% / 38.1% marginal tax rate.

    Paying salary would trigger 13.8% National Insurance but no-one does that !

    All I get is the corporation tax saving of 19% which reduces the cost to 1.25% x (1-19%) = 1.0125%

    So you are paying 1.0125p per Avios / Membership Reward point.

    What am I missing here if Rob’s numbers are correct ?

    • Rob says:

      We’re assuming you are paying higher level tax – you will need to be, actually, or its unlikely you’d be generating the sort of volumes to interest Amex.

      Many people also run unincorporated small businesses and so pay tax at the standard rates, which of course are virtually similar to going via the dividend route these days unless you keep money in the business.

    • BLT says:

      @Talay.
      I’m working through this as well at the moment. The big question is how do you use or take out your surplus income from the business after the 7.5% dividend is taken up. I am lucky to have extra money left at the end of the tax year and this would enable me to save the 19% CT and the 32.5% dividend tax whilst earning MR points. This would get to the 0.5p per MR point.