Changes have taken place this month, which mean that personal credit cards can no longer be used as payment for tax owed.
No More Personal Credit Cards for Tax Payment
On 13th January this year, (2018) HM Revenue & Customs (HMRC) made a significant change to their payment options for business.
Debit card and corporate credit cards remain acceptable as a payment option, but payments using a personal credit card will no longer be accepted. This is particularly important for business owners, as 31st January is the tax return submission deadline and the payments deadline for accounts for 2016/17 tax liabilities.
Reasons for HMRC Decision
HMRC has recently sent out a written communication that tax bills can no longer be paid using a personal credit card.
Their reasoning is that HMRC can no longer pass on bank charges for processing personal credit card payments.
This is something that has affected the retail industry as well, as new rules have been brought in to make it illegal for businesses to charge extra where payment is made using a credit or debit card. These laws were brought in as part of an EU directive designed to tackle the use of unfair card charges on consumers.
Who Will Be Affected?
There is no doubt that this change will affect many in the business community. It is thought that it will particularly impact small business owners and the self employed, who are used to juggling their accounts and money to pay bills and often use a credit card as a way to prolong settling the cost of a significant tax liability.
According to the Financial Times, 454,000 personal credit card tax payments were made in 2016/17 totaling £741m and £3.2m in bank fees.
What are the Implications?
If last year’s figures are anything to go by, it seems that nearly half a million people who were hoping to defer their annual tax bill through a personal credit card will now have to use an alternative method.
The legislation has been in place for some time, but it seems HMRC have left the communication of the changes a little late, not providing people with enough time to find alternative arrangements to settle their tax bill.
How To Make Your Tax Payment
Alongside the end of Credit Card Payments, it should also be noted that payment by cash or cheque at the Post Office is also no longer available. This is due to the end of the Post Office Transcash service.
The payment options that are available include:
- Online banking
- Telephone banking
- Direct debit
- Corporate credit card
- CHAPS or bacs
- At your bank or building society
If you have any problems paying your tax bill following this change, or if funds are tight, we recommend you contact HMRC as soon as possible to negotiate with them on “time to pay”, which is in effect a payment plan.
Failure to pay on time will result in self assessment penalties being applied. Which is something to avoid at all costs.
The changes highlight the need for small business owners to make sure that they set money aside regularly, in order to be confident of fulfilling tax liabilities by the set deadlines.
For more information about your tax liabilities, contact us today.