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17 Dec 2017

HMRC to ban credit card tax payments

800,000 self-assessment payments made by credit card

HM Revenue and Customs (HMRC) is to stop accepting payments by credit card from 13 January - less than three weeks before the deadline for self assessment tax returns.

This means that anyone planning on paying their tax bill this way now has less than a month to file their return.

This change could have a significant impact, as more than 800,000 tax payments were made by credit card in 2015-16.

Here, we explain how the new rules will work, and what you can do if you're struggling to pay your self-assessment bill.

Credit card tax payments to be outlawed

The ban on using a credit card will come into force on 13 January, two-and-a-half weeks before the 31 January deadline for submitting self-assessment tax returns.

While personal credit cards will no longer be accepted, corporate and business cards won't be affected.

The change is the a result of a new directive that will ban companies from charging a fee when customers use Mastercard and Visa credit cards.

As it stands, many companies demand a surcharge for credit card payments to cover their processing fees - and HMRCreceiveda total of £13.2m in credit card surcharges in 2015-16.

From 13 January, however, companies will either have to foot the processing bill themselves or stop accepting credit card payments.

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Can I pay other taxes by credit card?

You also won't be able to pay stamp duty, VAT or corporation tax by personal credit card from 13 January - but thechange doesn't affect all government services.

For example, the Driver and Vehicle Licensing Agency (DVLA) - which currently charges £2.50 to use a credit card - will still accept such payments, albeit without the surcharge.

How to pay your tax bill

Taxpayers can continue to use debit cards, direct debit, faster payment and BACS to settle their self-assessment debts.

Payment times vary, from online banking (same or next day) to new direct debits (up to five working days), so whichever method you choose, you'll need to ensure the money reaches HMRC by the deadline.

If you'd rather avoid being hit by a big bill each January, you can set up a budget payment plan, which will allow you to make weekly or monthly payments in advance.

What to do if you're struggling to pay

The most important thing to do is deal with this issue now, rather than waiting until the deadline, as phone lines are likely to be incredibly busy.

In the first instance, you should contact HMRC, as the taxman may work with you to find a solution.

This could mean setting up an instalment plan by direct debit, which will allow you to pay your outstanding bill on agreed dates.

Who has to file a self-assessment tax return?

Over nine million people in the UK have to complete a tax return.

You'll need to file one if you're self-employed (sole trader, business partner or director), have an annual income of £100,000 or more or if you have a pre-tax investment income of £10,000 or more.