Big news – HMRC cuts its credit card fee to 0.4% which means VERY cheap points

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

One of the biggest jokes, since the EU cap on Visa and Mastercard fees came into effect in December, was that the Government itself was ignoring them. The fee for paying your tax with a credit card actually rose in January to 1.5%.

The great news is that this move has been reversed. HMRC is now offering ‘interchange plus’ when calculating your credit card fee. That may sound like a very boring statement but, for many of us, it is the most exciting news to hit the miles scene in a while.

These fees apply when paying self-assessment tax, VAT, employers NIC / PAYE or any tax collected by HMRC.

For a self-employed person such as myself, this will be a fantastic miles and points generator. I still have the BMI Platinum Mastercard which earns 2.5 Avios per £1.

I did a test on this card yesterday and the new HMRC fee is 0.386%. This means that I will be able to ‘buy’ Avios for 0.15p each.

I tested another couple of cards:

Marriott Rewards Mastercard – 0.374% (0.37p per Marriott point)

IHG Rewards Club Premium Visa – 0.415% (0.2p per IHG point)

Curve – 1.973%

The Curve card figure is high because this is classified as a business card and is not subject to the caps on interchange fees imposed by the EU. Whilst high, you may still find 1.973% worth paying if you recharge your tax bill to an underlying American Express – especially if it lets you trigger a 2-4-1 voucher more quickly.

To take full advantage of this, you need a Visa or Mastercard which has a decent earnings rate. Those are harder to find these days on free cards but some paid cards do have strong rates.

The Virgin Flying Club Black Visa, for example, earns 1 mile per £1. Paying 0.4p per Virgin mile would be an excellent result. The same goes for the Emirates Skywards Elite card.

The Lufthansa Miles & More Visa earns 0.75 miles per £1 – and the card is free. 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.

The Lloyds Premier Avios Mastercard is the best Avios route if you don’t hold a legacy card. However, at just 0.3 Avios per £1, you will still be paying just over 1p per point. That will make sense for some people but not all. If you are prepared to jump through the hoops required to get one, the HSBC Premier credit card at 0.5 Avios points per £1 is interesting – you would by paying around 0.8p per Avios.

The big winners here will be the self-employed or SME owners who have a legacy Visa or Mastercard with a high earnings rate. Even without a legacy card, however, you could do very nicely by getting one of the card products above.

This is not a long term opportunity, unfortunately. The earning rates on many Visa and Mastercard cards are unsustainable under the new EU rules and will be slashed as contracts come to an end. For a couple of years, however, you can do very nicely …..

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 BA Amex American Express card

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 BA Premium Plus American Express Amex credit card

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

Category

British Airways and Avios, HSBC Premier Mastercard, IHG Rewards, Marriott Bonvoy, Virgin Atlantic and Flying Club

This article is closed to new posts. Discussion continues in the HfP Forums.

Rich says:

2 Apr2 April 13:37

I thought the bmi master card was 1.5 Avios per pound and the Amex was 2.5 Avios. Please correct me if I’m wrong.
- DV says:
  
  2 Apr2 April 13:52
  
  They vary. Some are 1 Avios/£ Visa and 2 Avios/£ Amex, and one is 2.5 Avios MasterCard for which you pay £60 pa. All closed to new customers for many years.
  - Rob says:
    
    2 Apr2 April 14:05
    
    Best £60 a year I spend!
    - DV says:
      
      2 Apr2 April 16:34
      
      Interesting to see how things come and go. Just as miles credit card earning was looking rather bleak, along comes the Curve card and the HMRC .4% charge, each of which provide a miles bonanza while they last.
BA-flyer says:

2 Apr2 April 14:09

So how does my local council get away with charging 1.9% for credit card payments? If the most they are charged is 0.4%, how do they justify the difference?
Jason says:

2 Apr2 April 14:20

Supercard is still free!!
- BLT says:
  
  2 Apr2 April 20:36
  
  Only until June!
Topp2015 says:

2 Apr2 April 14:23

Any news on when curve will arrive?
- Saif says:
  
  2 Apr2 April 14:50
  
  Some people have already received theirs. Apparently you will get an email notification to tell you yours has been shipped
- Axel Heyst says:
  
  2 Apr2 April 16:24
  
  Mine has arrived. It has a £200 daily limit on atm withdrawls but as some transactions may take overnight to appear it’s more like £200 limit every two days.
  
  Monthly limit of £5k on each linked card.
  
  Curve will send bank security divisions mad as users will change their spending patterns and the fuzzy logic on detecting fraud will be over zealous.
  
  Expect some laughter and tears
Alan says:

2 Apr2 April 18:02

Well on the upside it means my Accor Plat via Amex Plat status is now valid through to 31/12/17 😀 With regards status earning TBH I wouldn’t have had enough stays to retain it under the old system anyway so no major difference for me with this new system.
aceman says:

2 Apr2 April 18:52

Hopefully you’ll be able to shed light on the fate of the IHG card.

Can you remind us how much you value 1IHG point at compared to 1VS mile, compared to 1 hilton point.

I have no non-amex cards, and a truly terrifying tax bill due next year
- Rob says:
  
  2 Apr2 April 19:17
  
  You can buy IHG points for 0.4p so hard to value them at more. Hilton points are worth 0.3p at higher end hotels. Virgin Flying Club did not devalue and you can safely get 1p on Upper Class redemptions. Economy redemptions are also better value than BA as the taxes are £100 lower.
Oyster says:

2 Apr2 April 21:44

The one year they owe me!
Alex W says:

2 Apr2 April 22:25

OT but related. Can anyone suggest any method for earning a wedge of points by paying off student loan? Thanks
- harry says:
  
  3 Apr3 April 19:29
  
  One-off repayment
  You can make a one-off repayment to your student loan at any time using: •a debit or credit card;
  •cheque or postal order; or
  •an international bank transfer, if you are abroad.
  
  By debit or credit card
  You can make a card payment by logging in to your online account. We accept Visa Credit, Visa Debit, Visa Electron, Maestro, Mastercard Credit, Mastercard Debit and Laser (Euro). There will be approximately a 1.5% surcharge added to payments made by credit card or non-UK debit card. There’s no charge for using a UK debit card. If you, or someone else, would like to make a repayment towards your loan without logging in to your online account, it’s possible to make a card repayment using just your surname and customer reference number.
  http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3866890&_dad=portal&_schema=PORTAL
  
  ***
  
  So in your position I’d be using my debit card – but perhaps there is a case for Curve after all?
  - Genghis says:
    
    3 Apr3 April 19:32
    
    Did you take a punt in the end and apply for Curve, Harry? I remember you saying you weren’t sure.
    - harry says:
      
      3 Apr3 April 19:36
      
      no, call me stick-in-the-mud but I’m not that enthralled
      
      once the first young fellow-me-lad withdraws £1000 @ ATM in week 1, I might change my mind 🙂
  - harry says:
    
    3 Apr3 April 19:42
    
    I guess student loans might go down to a 0.4% charge same as HMRC, in which case i’d use my MBNA Visa 1 MR point per £
    - harry says:
      
      3 Apr3 April 19:47
      
      adds – following HMRC, it’s now hard to see govt agencies or pseudo agencies (eg council tax, student loans etc) charging more than the interchange+ 0.4% fee
      
      I reckon many will follow HMRC’s lead