Tax bills could be paid by credit card
Taxpayers may soon be able to pay their tax bills by credit card, under proposals being considered by the government.
The possibility of people being able to use credit to pay their tax bills has been raised in draft legislation addressing the powers at the disposal of HM Revenue & Customs. Under the plan, those paying by credit card would also have to pay a fee for doing so, to cover provider handling fees.
But debt charities say the plan could aggravate the problems of those struggling with high personal debt levels.
Beccy Boden-Wilks, spokesperson for National Debtline, says: “Using a credit card to settle a tax bill may be viewed as a convenient method of payment. But as a debt advice charity we would be concerned as to the reason why a person is using their credit card to settle a priority debt.
“If however, a person chooses to use their credit card one month as a one off due to a brief cash flow problem, this should not be a cause for concern.’
As part of the proposed changes, HMRC could claw back overpaid tax credits and child benefit by setting repayments off against any amount owed to individuals. Powers to access the bank accounts of taxpayers who fail to meet tax bills are still under review.
Also included in the draft legislation is a taxpayers ‘charter of rights’, in which the rights of taxpayers would be set out and protected. However plans to allow HMRC inspectors to enter people’s home without prior arrangement have been scrapped.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.