Can I Claim Credit Card and Payment Fees as a Business Expense?
Yes - payment processing fees for business transactions are deductible.
What HMRC Says
Transaction fees for processing customer payments are allowable business expenses.
When You Can Claim
- Stripe/PayPal fees
- Card machine charges
- Credit card interest on business debt
- Annual card fees for business cards
When You Cannot Claim
- Personal credit card interest
- Fees on personal purchases
Understanding Credit Card and Payment Fees Expenses
Credit card fees and payment processing charges are an unavoidable cost for any business that accepts card payments, and they are fully deductible against your company's Corporation Tax. This applies to all forms of payment processing: Stripe and PayPal transaction fees, SumUp or iZettle card reader charges, Worldpay or Barclaycard merchant services, Shopify Payments, and any other platform that processes payments on your behalf.
The fees you can claim fall into several categories. Transaction fees are the per-payment charges, typically 1.5-2.9% plus a fixed fee of 20-30p per transaction. Monthly or annual subscription fees for payment platforms are deductible. Equipment rental or purchase costs for card machines are deductible. Chargeback fees (when a customer disputes a payment) are deductible, even though they are frustrating. PCI compliance fees, if your payment processor charges them, are also deductible.
Credit card interest on a business credit card is deductible as a finance cost. If your company carries a balance on a business credit card, the interest charges are an allowable expense, just like overdraft interest on a bank account. Annual card fees for business credit cards (often £30-150 per year) are also deductible. However, personal credit card interest is never deductible, even if some of the purchases on the card were for business.
The VAT treatment of payment processing fees requires attention. UK-based payment processors like SumUp charge VAT on their service fees, which you can reclaim if VAT-registered. However, payment processing services from non-UK providers (like Stripe, which bills from Ireland) may use the reverse charge mechanism. PayPal often bills from Luxembourg. In these cases, you account for VAT under the reverse charge but effectively reclaim it at the same time, so the net effect is neutral. Always check whether VAT has been charged on your payment processing invoices.
For accounting purposes, payment processing fees should be recorded as a cost of sales or administrative expense, depending on your chart of accounts. Some businesses record them as a finance cost alongside bank charges. The categorisation does not affect the tax deduction, but keeping them consistent helps with management accounts and benchmarking.
Real-World Examples
E-commerce Stripe fees
An online retailer processes £150,000 in annual sales through Stripe, paying 1.4% + 20p per transaction in fees. Total annual Stripe fees are approximately £2,400. The full amount is deductible. Stripe invoices from Ireland, so the reverse charge applies for VAT — no net VAT cost.
Card machine for retail shop
A coffee shop pays £29 per month for a SumUp subscription plus 1.69% per transaction. Annual costs total approximately £2,300 in transaction fees and £348 in subscription fees. Both are deductible. SumUp charges UK VAT on the subscription, which is reclaimable.
Business credit card interest
A company carries a £5,000 balance on a business credit card at 19.9% APR while waiting for a large invoice to be paid. The interest cost of approximately £83 per month is deductible as a finance cost. The annual card fee of £75 is also deductible.
PayPal fees on freelance invoices
A freelancer's limited company receives client payments via PayPal, which charges 2.9% + 30p per transaction. On £80,000 annual revenue, PayPal fees total approximately £2,560. The full amount is deductible. The company also pays £15 per month for PayPal business features — also deductible.
Common Mistakes to Avoid
- Recording Stripe or PayPal income as the gross amount received rather than separating the fee — you need to record the full invoice value as income and the fee as a separate expense for accurate accounts
- Not reclaiming VAT on UK-based payment processor fees (like SumUp) where VAT is charged on the service
- Claiming personal credit card interest through the company because some purchases on the card were for business — personal credit card costs are never deductible
- Forgetting to claim chargeback fees and dispute resolution costs, which are legitimate business expenses even though they result from customer complaints
Frequently Asked Questions
Are Stripe fees tax deductible for a limited company?
Yes, all Stripe transaction fees are deductible as a business expense. Record the gross payment as income and the Stripe fee as a separate expense. Stripe bills from Ireland, so the reverse charge applies for VAT purposes if you are VAT-registered.
Can I claim credit card interest through my company?
Yes, interest on a business credit card is deductible as a finance cost. This includes monthly interest charges on carried balances and annual card fees. The credit card must be in the company's name and used for business expenditure.
Are PayPal fees a business expense?
Yes, PayPal transaction fees, monthly subscription fees, and any other charges from PayPal for processing business payments are fully deductible. Keep the monthly PayPal statements as evidence of the fees charged.
Can I claim the cost of a card machine?
Yes, both the purchase or rental cost of a card machine and the ongoing transaction fees are deductible. If you buy a card reader outright (like a SumUp reader for £39), the purchase price is deductible. Monthly rental fees for leased terminals are also deductible.
How do I account for payment processing fees in my bookkeeping?
Record the full invoice or sale amount as income (gross of fees), then record the payment processing fee as a separate expense. Do not net off the fee against income, as this understates both your revenue and your expenses. Most accounting software handles this automatically when you reconcile payments.
Source: HMRC Business Income Manual BIM45800 (Interest and finance charges) and BIM35000 (General deductions — business expenses)
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