Income Tax Stoozing

krisc_2

Hi,

Does anyone have experience of paying their income tax by credit card? I know HMRC charges a 1.5% fee for such transactions.

This could be great for a bit of stoozing. I'd rather keep my income tax payment in the bank earning 3% with A+L and in the meantime settle my tax return using my 0% for 10months Sainsbury's credit card (should have got the Tesco 12 months 0% card - doh).

But i'm wondering if the payment goes through on the card as a 'purchase' or a cash advance? Cash advance wouldn't be so good due to charges.

I asked Sainsburys credit card people, but they said it depends how HMRC put it through.....hmmmn?

K

LongTermLurker

er, daft question, but are you a taxpayer? Of course you are, or you wouldn't be paying HMRC - therefore, the 3% you're earning is subject to tax.

As you are paying HMRC directly, could I assume you're a high rate taxpayer? If so, your 3% comes down to 1.8%

Is the interest rate fixed or variable? Could it fall? Either way, 0.3% stooz doesn't sound too great to me (or even 0.9% if you're making massive profits as a basic rate taxpayer).

You'd make some profit from saving your tax bill at 1.8% net, but whatever way you look at it, a 1.5% fee doesn't make for appealing stoozability with current interest rates.

Careful_ly

I made a credit card payment in July.

If you pay by phone on 0845 305 1000 the fee is .91% it went on as a normal purchase.

HTH

krisc_2

LongTermLurker wrote: »

er, daft question, but are you a taxpayer? Of course you are, or you wouldn't be paying HMRC - therefore, the 3% you're earning is subject to tax.

As you are paying HMRC directly, could I assume you're a high rate taxpayer? If so, your 3% comes down to 1.8%

Is the interest rate fixed or variable? Could it fall? Either way, 0.3% stooz doesn't sound too great to me (or even 0.9% if you're making massive profits as a basic rate taxpayer).

You'd make some profit from saving your tax bill at 1.8% net, but whatever way you look at it, a 1.5% fee doesn't make for appealing stoozability with current interest rates.

Lurker,

I am self-employed. I don't pay higher rate tax.

It doesnt matter to me that the stoozing margin for this idea is relatively small. Let's face it, with the low interest rates for savings out there, the profit margin for most stoozing ideas is gonna be low. In the days of decent cashback interest rates, this idea would have been even better, but 0% on purchases is the way to go nowadays for stoozing (amongst others).

But it's a moneysaving (!) idea none-the-less.

The potential stoozing profit margin is also better than you suggest. I actually made an error in my first post in that the fee imposed by HMRC for online payments is 1.25% rather than 1.5%. My bad. And as Careful_ly says, it's only 0.91% if you pay over the phone (strange, but true).

But also, the tax return money that one holds back in a savings account doesnt necessarily have to go in an instant access savings account. There are 1-year bonds out there offering 4%, or 5% for two years.

More money in my pocket rather than HMRCs can only be a god thing. Even if it is only £130 or so.

gt94sss2

I read somewhere that from 14 December 2009, the fee for credit card payments made by telephone increasing from 0.91% to 1.25%.

The change brings the fee for telephone payment in line with that charged since December 2008 for credit card payments over the Internet.


Regards
Sunil

CannyJock

The fee is 1.25% and it counts as a normal purchase or bill payment - not as a cash advance. Ideal for a slow-stooze on a long promotion.

Also works for Corporation Tax and VAT too, where the fee simply becomes another business expense meaning that the additional tax benefit actually reduces the effective fee to 0.9875% assuming you're in the 21% corporation tax bracket