MSE News: Got a PPI payout? You probably owe tax

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Millions of victims of payment protection insurance (PPI) mis-selling will have to pay tax on their payout, the Government has confirmed ..."

Read the full story:

Got a PPI payout? You probably owe tax

Oneday77

You would think that the authorities should make the Banks do this automatically.
At the end of the day they have to do it on savings accounts why not here.
I understand why the tax should be deducted but surely they could make the process simpler.

tagq2

Oneday77 wrote: »

You would think that the authorities should make the Banks do this automatically.

This would hit the most vulnerable people who don't earn enough to pay tax and would have to know about and go through the process of reclaiming what was theirs anyway.

PAYE makes it very easy in this country for most people. And declaring savings interest on self-assessment is a matter of filling in a couple of boxes.

At 8% I'm almost annoyed I never got taken in by PPI salesmen .

oldvicar

tagq2 wrote: »

This would hit the most vulnerable people who don't earn enough to pay tax ....

People who earn(ed) enough to take out and repay a loan are not taxpayers? Crazy world we live in !

kerri_dfw

I wouldn't have earnt any interest on my 8% anyway, I spend my money too quickly to have put it in a savings account

tagq2

oldvicar wrote: »

People who earn(ed) enough to take out and repay a loan are not taxpayers? Crazy world we live in !

Tax is owed in the year you are paid compensation. Claims can go back six years to when more people were employed and such. JSA, set at the amount "the law says you need to live on", is set way below the personal allowance.

Perhaps I should have said "to pay income tax". For low earners the VAT punch is painful and NICs may not be insignificant.

gratefull

QUESTION:
If you were successful in claiming PPI through a claims company, and if their costs were, lets say 20% of 10k then effectively your claim cost 2k. So the costs of making the claim far outweighs any interest that is taxable, is this claimable?


ie. PPI claim £10,000
less costs to claim company £ 8,000
8% taxable interest £ 640

Simple logic it cost 2k to make the claim so how do you stand
can you claim these expenses back off the taxman :eek:

dilus

Got a PPI payout? You probably owe tax

Taken from the above article

What will I owe tax on?

PPI payouts are usually formed from three elements.

The first two constitute the compensation. They are:

A refund of the premiums paid
Interest you have paid on the premium
The third part is additional interest on the compensation at 8% per annum (not compounded, so no interest on interest). It is this part that is taxed.

*****interest you have paid on the premium******

This is what I have been arguing about for weeks and MSE's Guy Anker even states it.

So why are so many people NOT GETTING IT ?????????????

nutty_nat

dilus wrote: »

Got a PPI payout? You probably owe tax

Taken from the above article

What will I owe tax on?

PPI payouts are usually formed from three elements.

The first two constitute the compensation. They are:

A refund of the premiums paid
Interest you have paid on the premium
The third part is additional interest on the compensation at 8% per annum (not compounded, so no interest on interest). It is this part that is taxed.

*****interest you have paid on the premium******

This is what I have been arguing about for weeks and MSE's Guy Anker even states it.

So why are so many people NOT GETTING IT ?????????????

I called HMRC last week as my cheques had come net of tax, but my husband is a 40% taxpayer and pays his tax by PAYE. They advised us to send them a cheque for the extra 20% and a covering letter. Which we done yesterday.

I however don't work and I don't receive a pension so they advised that in April next year I can claim my 20% back.

Hope this helps anyone.

plumber2009

whenever money is moved, it is taxed.

you pay tax when you earn the money
you pay tax when you spend the money
you pay tax when you save your money
you pay tax when you die or when you get an inheritence.
now they want to tax your compensation!.

Tax man wins every time.

Welcome to RIP OFF BRITAIN. No wonder nobody wants to work or save.

ALIBOBSY

plumber2009 wrote: »

whenever money is moved, it is taxed.

you pay tax when you earn the money
you pay tax when you spend the money
you pay tax when you save your money
you pay tax when you die or when you get an inheritence.
now they want to tax your compensation!.

Tax man wins every time.

Welcome to RIP OFF BRITAIN. No wonder nobody wants to work or save.

They are not taxing your compensation just the "extra" 8% interest on top-just like savings interest.

On another forum I go on they seem to think that if a payment is made as a "gesture of goodwill" the whole thing is untaxable, what does anyone else think?

For me currently I am at home with the kids and a non tax payer so at least mine is easy. Just wondering if I need to declare it (I would not normally do a tax return and have never been asked for one).

Ali x