HMRC takes £50 million in credit card fees

Taxpayers have racked up record credit card fees on payments to HMRC, investigation finds.

HMRC has charged taxpayers £50 million to pay by credit card over the past five years.

A Freedom of Information request by Telegraph Money revealed that almost 500,000 payments were made to the taxman by credit card in 2014-15, racking up more than £12 million in fees in that year alone.

The taxman recently upped its card charges from 1.4% to 1.5% before bringing them down again earlier this year to 0.6% or lower, depending on the card used.

The charges changed in response to EU rules that cap the interchange fee (the amount the retailer pays to the credit card company), reducing it from 0.8% to 0.3%.

Figures also show that paying tax by credit card is getting more popular. The number of payments made by credit card rose from 423,347 in 2011-12 to 493,722 in 2015-15. Fees cost a record high of £12.5 million in 2014-15, up from £8 million in 2011-12.  

HMRC said that it doesn’t make any money from fees, and is only passing on the costs of paying by credit card to the department.

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Why are people making tax payments by credit card?

Experts say that a rise in credit card payments could be down to an increase in self-employment, which reached a record high of 4.5 million in 2014. As a result, more people need to use the self-assessment system, paying a whole year’s income at once.

Some use it to take advantage of deals and incentives for paying by credit card, such air miles. 

Paying by credit card might have advantages now that the fee is below 1%, James Daley of Fairer Finance told the Telegraph:

 "There are credit cards giving you rewards of 1pc or more, but getting the best value from them isn’t always straightforward and people could get it wrong," he said.

"It can make sense if you pay by credit card and then clear the balance by the end of the interest-free period - you are probably going to make the fee back in rewards."

HMRC’s current credit card fees

Each type of credit card will incur a different fee, depending on whether they’re personal or business credit cards.

Personal credit cards 

Corporate credit cards 

 Daley is confident that credit card charge rates won’t go up again post-Brexit, saying that higher rates aren't shopper-friendly. 

Other ways to pay

Of course, there are other ways to pay tax that don't involve using your credit card.

You could pay via bank transfer online or over the phone through Faster Payments, CHAPS or Bacs.

Alternately you could use an HMRC paying-in slip at your bank, building society or the Post Office which will allow you to pay by card, cash or cheque.

If you're not strapped for time, you can send a cheque through the post or pay by direct debit if you haven't set one up with HMRC aleady.

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