By Gina Clarke

‘Tax doesn’t have to be taxing’ is surely echoing round the head of every person yet to submit their tax return online by the ever-increasing January 31st deadline.

Despite HMRC’s soothing strapline, for thousands this year they face a limited way of transferring funds to the government’s finance arm, running the risk of an automatic £100 fine.

About 11 million people complete a self-assessment tax return every year, and the majority will expect to settle an income tax or capital gains tax bill. But for those relying on a credit card to do this will be disappointed as it has now been scrapped. From January 13th HMRC disabled the ability to pay by credit card after a UK wide ban on surcharges from Visa, Mastercard and American Express payments.

Why has HSBC removed the ‘pay by credit card’ feature?

The truth is that credit cards have long been seen as a way to rip-off consumers, with the government classing it as a ‘hidden charge’. While banks do add processing fees for credit card payments, historically companies have seen this as an opportunity to top up costs and make an additional profit.

Indeed, Just Eat revealed in 2016 that “payment card/admin fee revenue” accounted for about 13% of its total revenue. With the company forecasting revenue for 2017 at between £500m and £515m, that suggests the loss of the card fee cash would have cost it more than £50m. It has since added a blanket charge of 50p to cover each and every transaction.

However, HMRC decided to go the other way, and scrap the ability to pay by credit card altogether.

Currently, employed people who owe less than £3,000 on their tax bill can pay it through their subsequent PAYE system, but this was only if they submitted their return online by 30 December.

The tax due can still be paid by debit card, via a bank’s BACS, CHAPS or Faster Payments system, or by setting up a direct debit.

However, the credit card payment option – used in 454,000 cases in 2016-17 – has now been withdrawn.

Who does it affect?

Last year almost half a million people used the credit card option but as large a number as that sounds, it was still only 0.8% of payments received by the agency.

The charge added at payment was relatively small ranging from 0.374% to 0.606% but could soon escalate for bills worth thousands of pounds. HMRC believe that by absorbing these costs it would ultimately be unfair to the taxpayer.

Submitting a tax return? You won’t be able to with a credit card.

With eleven million people in the UK needing to file self-assessment tax returns – including those who are self-employed or who have significant savings income the inability to could hit them hard, especially if coupled with a £100 fine, the standard for those not submitting by January 31st.

However, the government has announced that it is working on plans to introduce a points-based system for those who fail to submit their tax returns on time, rather than an automatic fine.

Still, with it taking up to 7-years to phase in, it won’t help the thousands of people still to send in the return this year.

Transcash ban

It comes amid news that HMRC has also removed another option, the Transcash system. This was previously operated through the Post Office, but has been removed by operator Santander, a HMRC spokesman confirmed.

Santander said Transcash had been replaced by a new electronic bill payment service, but that HMRC had decided not to adopt it. It leaves some campaigners worried that there are now not enough options for people to pay their taxes.

Payments at the Post Office were banned in December.

The Low Incomes Tax Reform Group (LITRG) said that it was concerned that some people would struggle to find a way to pay in time, and that some could resort to taking out high-interest loans as they could not pay by credit card.

“Making payments may not be straightforward for some taxpayers, and we are keen to see that these changes are publicised as widely as possible,” said Anne Fairpo, who chairs LITRG.

“If making the tax payment will cause hardship, we strongly recommend people contact HMRC as soon as possible, and certainly before the due date of payment, to discuss their case.”

Still, for some of us, there can be nothing more important than filling in our tax returns online. Indeed, HMRC revealed that more than 16,000 people spent part of their Christmas filing a tax return including:

  • On Christmas Eve 6,033 completed a return, including 92 between 11 pm and midnight.
  • On Christmas Day 2,590 sent in a return
  • On Boxing Day 7,655 sent a return

So, while tax clearly isn’t taxing for some, others might receive a large shock when filing their tax return before January 31st, still expecting to pay with a credit card.

Don’t forget, any tax that remains can still be paid by debit card, via a bank’s BACS, CHAPS or Faster Payments system, or by setting up a direct debit.