Dear Listener

Percentages can be tricky. And if you sometimes find them perplexing take heart from this recent press release put out by ‘Top 25 Accountancy firm’ Wilkins Kennedy. It warned that there was to be a steep rise in the cost of paying your tax by credit card.

The credit card surcharge had gone up, it said, to 1.25% having been 0.9% last year which was “a rise of a quarter on the previous charge, warns Wilkins Kennedy.”

Oh dear. This GCSE level error was published on 25 January by Mattison Public Relations in the name of the Head of Tax at Wilkins Kennedy, Matthew Hall. Someone has made the classic mistake of dividing by the wrong number. In effect it has confused the arithmetic for a fall with that for a rise. A fall from 1.25% to 0.9% would indeed be a drop of about a quarter – or (1.25-0.9)/1.25 = 28%.

But a rise from 0.9% to 1.25% is an increase of (1.25-0.9)/0.9 which is 38.9%. And – just to be pernickety – Wilkins Kennedy got the earlier rate wrong too – it was 0.91% not 0.9% so the actual rise is 37.78%.

Matthew Hall himself was rather embarrassed when I pointed the mistake out to him. And to his credit took full responsibility for it though it was clear he had not done the calculation personally and was going to have words with the PR agency.

But why does the Revenue act like a cut price airline and impose this surcharge? Until recently HMRC did not allow tax bills to be paid by credit card. But that changed on 14 December 2008 when it became an option for everyone on self-assessment. The Revenue decided to pass on to the individual taxpayer the charge made by its bank to process the credit card payment. Initially that surcharge was fixed at 0.91%. A year later on 14 December 2009 HMRC raised the surcharge to 1.25% – just in time for this year’s self-assessment deadline on 31 January.

The Revenue says this 38% rise in the fee reflects the actual cost of processing the payments and an unexpectedly large number of taxpayers are using credit cards which are more expensive. A spokesman insisted it made no profit from the charge but had to recover it from those paying by credit card. He also revealed that nearly 100,000 people have paid their tax with a credit card, shelling out more than £1 million in charges.

IN MONEY BOX THIS WEEK

Last week we looked at the cost of having your state benefits paid onto a pre-paid plastic card. We suggested that a basic bank account was a cost free alternative. But lots of you have told us you can’t get a basic bank account – despite a commitment from the banks and the Government that everyone can. We challenge the Minister in charge of financial inclusion.

Annuities – the income for life you buy with your pension fund – are getting more expensive. In other words the same size pension pot buys you a smaller income for life. Why? And are there any reasonable alternatives?

HMRC is taken to task for two major failings – there are widespread reports that thousands – perhaps millions – of people are being sent the wrong tax code. Many people seem to have got two or more, in some cases all of them wrong. And that could mean they have too much tax taken off their pay or pension. And while we are at it, why does the Revenue fail to answer more than four out of ten calls from worried customers?

Have you ever forgotten a birthday? Even by a day? Then take care. If you forget the 10th anniversary of when you went millennium mad and bought a with profits bond in 2000 you could get 20% less than if you remember. (And no emails please about the fact that the millennium was really on 1 January 2001 – we’ve done that debate).

That’s four items and there could be a vacant fifth spot – or we may let those four expand to fill our waistline as we relax in our pyjamas and slippers ready to saunter down to Tesco after the show. Find out what makes it – and what doesn’t – by listening right to the end of our 24 minutes starting at noon on Saturday, or at 9pm on Sunday, or on the website www.bbc.co.uk/moneybox at any time. There you can also read stuff, watch videos, follow up items, download transcripts and documents, subscribe to our podcast – 117,000 of you did that in December – and send us stories or ideas you want us to look into. And of course Have Your Say on basic bank accounts.

Best wishes,

Paul

PS Don’t forget the programme preview on Breakfast BBC 1 soon after 0845 on Saturday.

e-mail Paul Lewis