A 1% card tariff can cost 3% on a £10 payment before terminal rental or other charges. Build those costs into your job price: adding a separate fee for an ordinary UK consumer card payment is prohibited, and calling it a bank-transfer discount does not automatically make it lawful.
Rules checked 11 September 2026. Every tariff and business figure in the worked examples is illustrative, not a market quote.
The interchange cap covers only one slice
For a typical Visa or Mastercard payment, interchange goes to the customer’s card issuer, scheme fees go to the network, and the acquirer’s charge covers its service and margin. These sit inside the merchant service charge you pay.
The UK interchange caps are 0.2% for consumer debit cards, including prepaid, and 0.3% for consumer credit cards where the merchant, acquirer and issuer are in the UK. Commercial cards are outside those consumer caps. Your total merchant service charge is not capped at 0.3%. (Payment Systems Regulator)
Twenty pence matters most on small tickets
Take an illustrative tariff of 1% plus 20p per successful payment, with no other charges included in this first table.
| Payment | Illustrative percentage fee | Illustrative fixed fee | Total fee | Effective rate |
|---|---|---|---|---|
| £10 top-up | £0.10 | £0.20 | £0.30 | 3.00% |
| £75 service call | £0.75 | £0.20 | £0.95 | 1.27% |
| £250 repair | £2.50 | £0.20 | £2.70 | 1.08% |
| £1,000 installation | £10.00 | £0.20 | £10.20 | 1.02% |
| £5,000 job | £50.00 | £0.20 | £50.20 | 1.004% |
Calculate effective rate as fee divided by payment, multiplied by 100. Two £75 payments incur 40p of fixed fees; one £150 payment incurs 20p. Deposits and staged payments therefore change the arithmetic too.
For many small tickets, negotiate the fixed fee. For fewer large tickets, negotiate the percentage. A 0.1 percentage-point reduction saves £5 on £5,000; removing 10p saves just 10p. Keep sensible deposits even where they create another transaction: financing materials yourself can cost more.
That gives you a test you can run against any two quotes. A tariff of 1% plus 20p beats a flat 1.75% on every payment above £26.67, and loses on every payment below it. The arithmetic is one line: 0.01T + 0.20 = 0.0175T, so T = 0.20 / 0.0075 = £26.67. Substitute your own two tariffs and the break-even ticket falls out the same way, then compare it with your actual average payment. A firm whose average job is £250 and a firm whose average job is £15 should not be signing the same contract.
Turn the statement into an annual bill
Assume an £80,000-turnover sole trader takes £60,000 by card through 600 payments, evenly across 12 months. The average ticket is £100. All charges below are invented for comparison; your contract may bundle them differently or omit them.
| Annual line | Illustrative assumption | Annual amount before VAT |
|---|---|---|
| Percentage processing | 1% of £60,000 | £600 |
| Fixed processing | 600 x 20p | £120 |
| Terminal rental | £15 x 12 | £180 |
| Minimum service charge top-up | £15 monthly floor, already exceeded | £0 |
| PCI non-compliance | £10 x 12, left unresolved | £120 |
| Statements | £2 x 12 | £24 |
| Chargeback handling | 2 x £15 | £30 |
| Total | Excludes disputed sales themselves | £1,074 |
Here processing reaches £60 each month, so a £15 minimum adds nothing. If qualifying charges were £8, a £15 floor would add £7, not another £15. Check which charges count towards your particular minimum.
For a concrete cash total, assume this hypothetical invoice adds £36 VAT on separately supplied terminal rental and no VAT on the remaining lines: £1,110 paid annually. That assumption describes the example invoice, not a universal tax classification.
The processing-only rate is £720 / £60,000 = 1.20%. The all-in cash rate is £1,110 / £60,000 = 1.85%. Do not divide fees by the £80,000 turnover: that includes payments which never touched the card machine.
The gap between those two numbers is the part you can actually do something about. Clearing the PCI questionnaire removes £120 a year from the example and takes the all-in rate to £990 / £60,000 = 1.65%. That single administrative job is worth more than 0.1 percentage points shaved off the headline rate, and it is free.
Average ticket moves the answer as much as the tariff does. Run the same £60,000 through the same 1% plus 20p at three different average payments and the fixed fee alone swings the bill: at a £25 average that is 2,400 payments and £480 of fixed fees, at £100 it is 600 payments and £120, and at £400 it is 150 payments and £30. Same turnover, same tariff, £450 a year between the extremes before a single other charge.
Use your own gross card sales and transaction count for the same period. Add separate rental invoices, gateway charges and fees deducted before settlement. Track refunds, chargeback administration and the underlying disputed sales separately, so lost revenue does not masquerade as a processing tariff. Use 12 months if trade is seasonal.
VAT recovery does not refund the fee
HMRC’s finance notice distinguishes exempt merchant charges from taxable terminal rental, unless the rental is ancillary to an exempt card service. Other services need their own classification. You cannot reclaim VAT that was never charged.
A normally VAT-registered trader with full input-tax recovery and a valid invoice could reclaim the example’s £36, leaving £1,074. A non-registered trader recovers nothing. Under the Flat Rate Scheme, purchase VAT is generally unrecoverable; the capital-asset exception does not turn monthly terminal rental into a qualifying purchase. That trader also bears £1,110. See what crossing the VAT threshold changes.
Fix PCI status and read the terminal term
A PCI non-compliance fee is contractual, not a government levy. For example, Worldpay’s UK terms, clause 18.3 distinguish an annual management fee from monthly non-compliance charges.
Ask your provider which validation is missing, complete its applicable questionnaire and any required scans or remediation, then obtain confirmation that your status is accepted and billing will stop. Check the next statement. Paying the charge does not establish compliance, and completing validation does not necessarily cancel a separate management fee.
Specific Direction 16 limits initial terms for relevant new terminal contracts to 18 months, followed by monthly terms with one month’s merchant notice. It covers merchants below the annual card-turnover threshold the direction sets, where the terminal comes from a directed provider, including relevant third-party leasing arrangements. Check the current threshold in the direction before assuming you are inside it. This is not a universal cancellation right over every payments contract; check exit charges and older initial terms.
Ask for the personalised summary box and use quotation tools: these and shopping-around prompts form part of the PSR remedies. PSR publications remain the reference here. The Treasury’s July 2026 consultation describes consolidation into the FCA through legislation under parliamentary consideration, not a completed transfer.
Keep the customer’s price the same
The operative ban is regulation 6A of the Consumer Rights (Payment Surcharges) Regulations 2012, inserted by the 2017 Payment Services Regulations. For payments with both payment-service providers in the UK, personal cards are protected even if the buyer is a business; commercial cards fall outside the absolute ban but remain subject to a cost ceiling. Regulation 6B changes the scope where only one provider is in the UK.
An unlawful surcharge term is unenforceable and the excess repayable under regulation 10. Customers can seek repayment through civil proceedings; Trading Standards can receive complaints.
The government guidance, paragraphs 13.2 to 13.4, warns against discounts creating an effective surcharge. Do not assume that £1,000 by card versus £980 by transfer is safe. A genuine discount offered equally across protected methods avoids that distinction.
A minimum spend is a separate issue from surcharging, but card contracts matter: Visa’s merchant rules restrict minimum transaction amounts outside the US exceptions.
For larger jobs, compare bank charges and collection effort with the card fee. Ask: “Bank transfer is welcome using the invoice reference; the agreed price is the same.” Confirm receipt in your account. Price payment handling into the whole job, then retain card acceptance where prompt payment makes it worthwhile.
