Can you use a credit card to pay HMRC?

Andrea Piacquadio
Can you use a credit card to pay HMRC - lady sitting on floor resting back on sofa with laptop on lap yellow poloneck and jeans

Can you use a credit card to pay HMRC for tax bills or National Insurance contributions? Even with the best financial planning, there are times that credit cards are a handy solution but there are stringent rules on what you can use them for when paying HMRC.

Your e-commerce business may be registered as a limited company or you may be a sole trader, but whatever entity choice you made for your business, taxes will have to be paid. Here’s the lowdown on the current situation.

The end of personal credit card usage

In early 2018, HMRC delivered a crushing blow to many freelance business owners when they declared that they would no longer accept personal credit cards for tax liabilities, and the ruling still stands.

The change came into play due to an amendment to European law. A growing number of freelancers and small business owners had been paying by personal credit card, so the last-minute change was not viewed favourably.

We recommend getting an estimated tax liability from an e-commerce accountant, such as ourselves, so you can put aside funds and easily pay your tax bill come the time.

Corporate credit card usage

While you cannot use a credit card to pay HMRC if it is a personal card, you can use a corporate credit card for an additional fee. According to HMRC, you can use a credit card to pay:

  • Self-Assessment taxes
  • Employers’ PAYE and National Insurance
  • VAT
  • Corporation Tax
  • Stamp Duty Land Tax
  • Income Tax (because you previously under-paid)
  • Miscellaneous payments (if your payment reference begins with ‘X’)

Credit card fees

The amount your e-commerce business will be charged for making payment via credit card is set by the bank and as such, no figures are available. If you begin the process to pay your bill you will see notification before the transaction goes ahead, stating the fee amount.

It is worth noting that from 1st November 2020, HMRC will also bring in fees if you pay by corporate debit card, again at a level set by the bank.

There is no charge for payment by Direct Debit, bank transfer or cheque.

Can you use a credit card to pay HMRC - laptop close up with credit card in hand

Should you use a credit card to pay HMRC?

If you are struggling to meet your tax obligations, it is best to avoid putting large amounts on credit. Your e-commerce business may not be able to meet the repayments and will incur additional interest costs that could spiral and limit your business. A simpler solution is to contact HMRC and ask to be put on an instalment plan. If you don’t feel comfortable doing this yourself, your accountant will be able to negotiate on your behalf.

Accountants and Tax Obligations

Don’t struggle to understand your taxes or be muddled when it comes to putting aside the right amount; talk to an e-commerce accountant. Not only will they be able to help you estimate and save for your tax bill, but they will also be able to ensure you are paying the correct amount.

Next Steps

If you are looking for help regarding the taxes or any other aspect of your e-commerce business’ accounting, our team are happy to help. As e-commerce specialists, we can help you to build and scale your store, so it reaches its full potential.

The best time to start is now.