Author Mark Fairlie

HMRC has announced that taxpayers will no longer be able to pay their tax bills by credit card.

The letter sent out to taxpayers last month confirmed that HMRC would “no longer accept payment by personal credit card”. Coming into force from January 13th, the ban leaves those completing their annual tax returns just eighteen days to find the funds to pay their tax for 2016-17.

In 2016/17 alone, more than 454,000 tax payments to HMRC were made via credit card, worth a total of £741 million. Whilst this reportedly only makes up 0.8% of payments received, many believe the change will have a significant impact on the thousands of taxpayers that rely on this payment option.

Why has the change been made?

The Government announced their ban on “rip off” card fees last summer following a new EU directive. This made it illegal for all UK companies, including HRMC, to charge their customers for paying by card. The change also means that businesses are now liable to pay all bank charges for processing card payments themselves.

At the time it was announced, Guy Anker of predicted “some companies [would] raise prices for all to compensate for the loss”, however, HMRC have instead chosen to ban credit card payments entirely.

A spokesman for HMRC has said that “it would be unfair to expect other taxpayers to pick up [the] cost” of processing the credit card payments, and that absorbing the cost of the fees themselves would damage their service and still impact on taxpayers.

Director of Fairer Finance, James Daley, said the ban was a “very un-consumer friendly move by HMRC which restricts consumer choice.” He stated that it was not “what the Government intended to happen as a result of its fees crackdown.”

HMRC announce ban on credit card payments

How will this affect taxpayers?

For the 11million Britons currently rushing to complete their tax returns before the 31st January deadline, the sudden change has come as a shock.

“Pulling the payment rug out from beneath me at such short notice should simply not happen,” says accountant Brian Barrett in the FT. Having only received his letter outlining the ban in mid-December, he believes HRMC should have given people more time to plan alternative methods to make their payments.

He added: “I know that I will not be able to pay my tax bill in cash — and why should I?”

Partner at UHY Hacker Young, Andrew Snowdon, has said:

“the ban comes at a tough time in the economy and is insensitive, to say the least.”

He believes it “beggars belief” that HMRC has chosen to take this approach when “using a credit card may be the only way some taxpayers can afford to pay their tax bills.”

Almost half a million people in the UK currently spread the cost of their tax bill over several months by using a credit card. The Low Incomes Tax Reform Group has said the change will have a massive impact on those on low incomes who rely on credit cards to meet these liabilities.

People wishing to use credit cards to pay their tax for 2016/17 have been urged to file their returns and pay their bills before January 13th.

Following the deadline, those reliant on credit cards will be left to find alternative methods, such as taking out a personal loan or using money transfer credit cards to transfer funds to their bank account. They may also be able to negotiate “time to pay” with HMRC to settle their liabilities.

As the Post Office’s Transcash service ended on 15th December 2017, meaning taxpayers can also no longer pay their bills by cash or cheque at their local Post Office.

HMRC have said they have a range of ways people can pay their tax bills “depending on the type of tax being paid, including debit cards, Direct Debit, Faster Payment and BACS.”