HMRC Bans Credit Card Tax Payments

Posted by Tom Magor in Personal Finance on 12 January 2018 - Tom is a Senior Credit Analyst at checkmyfile.

From 13 January 2018, it will no longer be possible for consumers to use a personal credit card to make a payment on HMRC’s Self-Assessment tax portal. Historically, this has been a popular option as it allows what is often a considerable sum to be deferred.

The move comes in response to new rules which prevent HMRC from passing on the bank charges for processing credit card payments. The timing of the announcement is likely to be a particular inconvenience with 11 million Britons trying to complete their annual tax return prior to the deadline on 31st January.

How many people pay tax by credit card?

To illustrate the popularity of the payment method, in 2016/17 there were 454,000 credit card tax payments worth a total of £741m which resulted in approximately £3.2 of bank fees. Despite the sums involved, personal credit card payments only accounted for a mere 0.8% of payments by volume and 0.2% by value. While that amounts to a small proportion, it still leaves nearly half a million people needing to find an alternative payment method from now on.

There is particularly inconvenient for people who are self-employed, many of whom stated that they only received notification of the change in mid-December, leaving little time to arrange alternatives. Where people run their own business, every penny counts and the line between personal savings and money for the business are all-too-often one and the same, meaning for some, this could have a knock-on effect.

The Low Incomes Tax Reform Group, a charitable organisation, say that the change will have a particularly adverse impact on those with low incomes who previously heavily relied on the use of credit cards to pay their tax bills.

Why aren’t credit card payments accepted?

The charges levied by credit card providers are generally much higher than their debit counterparts, and these fees have traditionally been passed straight to consumers. The move by HMRC coincides with new rules introduced as a result of an EU directive, making it illegal for organisations to charge any fee for using a debit or credit card to make payment. HMRC defended the move by saying that as a public funded body, it was unable to absorb the cost of credit card transactions, and that the move would result in the fees ultimately being extracted from the public purse.

When the option to make payment via credit card was introduced in 2008, there were concerns that it would discourage people from setting money aside for tax payments.

Alternative ways to pay

Moving forward there are alternatives available for those who are reliant on credit to pay their tax bills. A money transfer credit card – where you can switch part of an available credit limit from a card as cash to your current account (albeit for a fee) could provide a short-term fix. This would facilitate using a debit card, whilst still getting the benefit of any interest free period.

What if I don’t pay?

The important thing is to not ignore the problem. On top of the fines and interest that would come with not paying at all, HMRC is able to instruct debt collection agencies to pursue the debt, take you to court, or even make you bankrupt. In either case, your credit rating will be severely damaged, for a long time to come.

How does APR work? – Your questions answered

APR stands for Annual Percentage Rate and is a standard measure that allows you to compare the total cost of credit from different lenders.

Published on 30 Aug 2019 by Andrew Brown

Full Article

Check your Multi Agency Credit Report before the PPI deadline

The PPI deadline is at 11.59pm on Thursday 29 August. After this point, you can no longer submit applications to reclaim any PPI you are owed from lenders. If you’ve not done it, the time is now to check whether you are owed money. If you start your PPI application before the deadline, it’s still possible to reclaim what you’re owed.

Published on 28 Aug 2019 by Andrew Brown

Full Article

How interest rates are calculated

If you’ve ever applied for a form of credit, you may well have discovered to your cost that the advertised APR and the interest rate you’re offered if you are accepted can be very different things.

Published on 14 Jun 2019 by Richard Catlin

Full Article

The Importance of Proving Stability to Lenders

In addition to the key roles that your Credit History and Affordability play in determining whether or not you will be accepted for credit, we regularly talk about the importance of being able to demonstrate your ‘stability’ to potential lenders.

Published on 15 Mar 2019 by Sophie Regester

Full Article

If I Change My Name Can I Still Get Credit?

Legally changing your name is an increasingly popular thing to do in the UK: while getting married or divorced still makes up a large proportion of this, there is a growing trend towards people changing their name following civil partnerships, a change in gender, living in blended families, or simply because they’re seeking a change – the list is long.

Published on 22 Feb 2019 by Tom Magor

Full Article

Which Credit Report Information Can Landlords See

These days whenever you rent a property you may be required to pass checks set by the landlord or letting agent to prove that you will be a good tenant and that you’ll be able to reliably make rent payments to the property on time.

Published on 7 Feb 2019 by Kevin Pearce

Full Article

What Credit Checks Look For When You Switch Energy

As we get deeper into Winter, it’s inevitable that millions of consumers across the UK will end up using more energy and spending more on bills due to the colder weather and long stretches of darkness.

Published on 9 Jan 2019 by Jamie Mackenzie Smith

Full Article

Pros and cons of going paperless

Whether you are environmentally motivated or simply to get a discount for moving your billing online, you might find it makes sense to abandon paper for your business, if you haven’t already.

Published on 7 Dec 2018 by Kevin Pearce

Full Article

How To Get The Best Car Finance Deals

New car sales may have slowed in recent years, with the economy, emissions scandals and Millennials all being cited as the root cause at one point or another. But the number of people choosing to use credit as a means of driving away in a new car continues to rise, according to figures from the Finance & Leasing Association which shows that the new car finance market grew by 15% in July 2018 when compared to the previous year.

Published on 8 Oct 2018 by Kiah Phillips

Full Article

We're Now More Likely To Be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, car finance, and mortgages – than they are collectively depositing into savings accounts.

Published on 5 Oct 2018 by Sam Griffin

Full Article


We are rated number 1 for customer service on