Approximately 800,000 taxpayers used their credit card to settle their tax bill through self assessment in the 2015-16 tax year. But, as of 13th January, this will no longer be one of HMRC’s payment options. This is important to know before you try and pay any tax you owe for the 16/17 tax year through self assessment.
Which credit cards are affected?
Personal credit cards are banned, as are PayPal and ApplePay. However business and corporate credit cards will still be acceptable forms of payment.
Why can’t I pay by personal credit card?
The short answer is that new legislation that came in on 13th January stops companies charging customers a fee for paying by Visa or Mastercard credit cards. HMRC don’t want to foot the bill for processing credit card payments themselves and so have removed them as a payment option. The extra charges totalled £13.2m in 2015-16, so you can see their point.
Not great timing…
Given as there’s only two weeks before the self assessment deadline, the timing of this new regulation could be better. There is no way that all the taxpayers who chose to pay using their credit card last year will have heard about the rule change before the payment deadline. Some people will be caught out, as they had planned to do the same thing this year and have had little warning from HMRC.
Without my credit card, what are my alternative payment options?
You can pay your self assessment tax bill using BACS, faster payment, at your bank, direct debit, debit cards and by cheque in the post. You just need to marry up the payment time with HMRC’s deadline. They mean that the money must be in their account by the deadline, so you need to allow for your bank’s transference time.
You can also spread the cost of your bill by establishing a budget payment plan with HMRC. This becomes monthly or weekly payments, instead of one large lump sum.
Does this mean that all government departments have banned credit card payments?
There is no blanket ban on credit cards across all government departments. The DVLA will accept credit cards, without their previous £2.50 fee. But you will not be able to use a personal credit card to pay corporation tax, stamp duty or VAT from 13th January 2018. You need to check the rules of whichever department you are dealing with.
Are you worried that now you can’t budget for your tax bill?
If you’d been relying on using your credit card, this news could be quite a blow. Call HMRC to discuss your situation especially if you think you will struggle to pay your usual amount. There is the possibility of setting up payment in instalments and even having a six month break in payments. The key to handling this tricky situation is to phone them today. The closer it gets to the deadline, the less chance you have of getting them on the phone.
Member of the ATT