How to indirectly pay your January tax bill with an American Express card

If you are self-employed or pay tax outside PAYE for other reasons, 31st January is the day that you will need to make your final tax payment for the 2013-2014 tax year.

(EDIT:  This article is now out of date.  Please click here to read our 2020 article on cunning ways of paying your HMRC tax bills with an American Express, Visa or Mastercard.)

HMRC accepts credit cards for tax payment. However, it does not accept American Express – only Visa and Mastercard.  There is a 1.4% fee for the privilege.

To be honest, no current Visa or Mastercard products have a generous enough reward scheme to justify paying 1.4%. I have the old BMI MasterCard which earns 2.5 Avios per £1, so that is OK – I am effectively buying Avios points for 0.56p.

The ONLY justification for using a Visa or Mastercard would be to hit a spending target.  The IHG Rewards Club Premium Visa offers a free night when you spend £10,000 on their card whilst the Hilton Visa gives you Hilton Gold status for spending £10,000.  Either of these may justify a £140 fee to HMRC, especially as you will also earn some IHG or Hilton points as well.

There is one way around this, although it is very fiddly except for small amounts.

3V Virtual Visa gift cards, available from Tesco, are no longer accepted by the Revenue. However, the ‘premium’ prepaid Visa cards sold in Tesco are still accepted. These cost £53.95 for a £50 card.

The maths would work like this:

You buy £1,000 of premium Visa cards at Tesco for £1,079, paying with your American Express.

(Do not buy more than four per transaction, though, as the Tesco tills tend to throw a wobbly beyond that.)

Tesco gives 150 bonus Clubcard points for every £50 of giftcards you buy. This means you receive 3,000 Clubcard points (7,200 Avios) which offsets the £79.

You would also get points on your Amex credit card from the spending, and it would count towards any sign-up bonus and / or your BA Amex 2-4-1 voucher. If you use an American Express Preferred Rewards Gold, you would earn 2 Amex points per £1 as supermarket spend earns double points.

You can then redeem the Visa gift cards via the HMRC website – only do a few at a time, though, or it locks you out. They are treated as debit cards so there is no additional fee.

Assuming you used an Amex Gold and are in your first year of membership (and so getting double points at supermarkets) buying £1,000 of the premium gift cards would generate:

3,000 Clubcard points from the gift card promotion (7,200 Avios)

2,160 Amex Membership Rewards points (2,160 Avios)

That is 9,160 Avios for £79 plus quite a bit of running around.  It is an acceptable deal but not one that I will be rushing to use.  However, if you have a spending target to hit on a new American Express card then it is a different matter altogether.

This strategy will not necessarily work for everyone, but it is worth thinking about.  You may also want to consider the IHG or Hilton cards – you still have enough time to apply and receive the card before the end of the month.

Want to earn more points from credit cards? – December 2021 update

If you are looking to apply for a new credit or charge card, here are our November 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 top current deals:

British Airways American Express

5,000 Avios for signing up, no annual fee and an Economy 2-4-1 voucher for spending ….. Read our full review

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

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

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee 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

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

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

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