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Paying tax by credit card convenient but expensive

Best Buy cashback credit card could cut the cost

UK taxpayers can now pay their tax bill to HMRC by credit card. However, consumers should watch out – paying by credit card will incur an extra charge of 1.25% of the amount paid.

Credit card

For a taxpayer paying tax of, say, £10,000 under the Self Assessment system, this means an extra £125 on your bill, not to mention the interest you’ll be paying on your credit card. Payments by debit card do not attract the 1.25% charge.

Cashback credit cards

If you do decide to pay by credit card, it’s worth considering a Which? Best Buy cashback credit card. Make sure you check with the credit card provider that the payment will attract cashback though. If the credit card company treats tax payments as the equivalent of a cash advance rather than as a purchase you’ll end up paying a higher interest rate, you probably won’t get an interest-free period and you won’t get any cashback. And that’s in addition to the 1.25% charge. Ask your credit card provider before you make the payment and make sure you don’t exceed your credit limit.

  • To find the best credit card for you, check out the Which? Best Buy credit card reviews.

How to pay your tax online

The online payment system, known as BillPay, is operated by Alliance & Leicester Commercial Bank. According to its website, HMRC does not accept American Express chargecards or Diners Club cards. We spoke to American Express and they’re working with HMRC to allow tax payments with their cards – the Amex Platinum Cashback credit card is currently the cashback credit card with the highest cashback rate, paying 5% for the first three months.

To pay your tax online, visit the HMRC tax payment website. You’ll need your credit or debit card details and your Self Assessment reference number, also referred to as your UTR. This is shown on the payslip HMRC sends you and is located in the reference box. The reference number is made up of ten digits followed by the letter ‘K’ – for example 1234567890K.

BillPay can also be used to pay employers PAYE, NICs and Stamp Duty. The minimum payment you can make is £0.01 and the maximum is £99,999.99.

If you need advice about payment, contact the HMRC Help Desk on 0845 302 1423 (Opening times: 8am to 5pm Monday to Friday).

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