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

edited 30 November -1 at 1:00AM in Reclaim PPI & Other Insurance
48 replies 26K views
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  • Hi

    I have checked out the tax position with our tax accountant at work and he said the 8% is liable for tax.

    I went back at look at the calculation sheets from Natwest for my PPI refund and they have deducted the 20% so I'm reading that I don't have to declare anything to the tax man.

    RDA
  • my OH claimed against RBS for misselling PPI, she got word that her claim was upheld. There was 4 loans and on each settlement figure they took off 20% tax totaling almost £600.
  • tagq2tagq2 Forumite
    382 Posts
    ALIBOBSY wrote: »
    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?
    It's not a gesture of goodwill, though. It's money you expect and are entitled to. Wouldn't it be great if every compensation agreed upon in every contract was denied at the last moment and replaced with a mysteriously similar gift payment? :D

    If you got offered an extra amount e.g. because they did a particularly bad job of handling your case then that extra amount would probably be a goodwill gesture. Same might apply if they decided you had no claim but wanted to keep you sweet with some other (smaller) amount.
    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).
    Unlikely. When you need to. The returned capital isn't income anyway, only the 8% interest.
  • edited 15 November 2011 at 10:48PM
    ALIBOBSYALIBOBSY Forumite
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    edited 15 November 2011 at 10:48PM
    No some banks won't admit they were at fault or say there is no "proof" so in some cases they don't offer a settlement, they offer a figure as a "goodwill" payment.

    Often happens in court cases where the party being sued wants to settle, but not admit liability. They offer the amount claimed or close to as a "goodwill" gesture.

    So this is different than a normal yes we are at fault here you are kind of claim. Sometimes happens with older claims were some or all of the premiums aren't known so they use a sort of average and come to an agreement.

    Ali x

    Thanks re the tax position, will keep a note if and when any of my claims final payup how much is the 8% and see if I need to declare at the end of the year.
    "Overthinking every little thing
    Acknowledge the bell you cant unring"

  • sweetdaisysweetdaisy Forumite
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    Hope that someone can give me some advice :).

    I didn't realise until yesterday (when I read this thread) that I would have to py tax on the 8% that was refunded. I received a PPi claim from Halifax and worked out that the 8% comes to £139.

    I am currently on Maternity Leave (go back to work full-time in April).

    Do I contact my local tax office and tell them about the payment and could I pay the whole amount in full now, or does it have to be taken from my Tax as part of my job?

    Never filled in a self-assessment form, so not sure how I pay them the tax that I owe them.

    Thanks in advance.
  • I think that the options that you have are to complete a Self Assessment and pay the full amount that way or you can ask to pay it through your tax code. HMLR will adjust your tax code until the amount is paid off, just keep an eye on it so that they change it back when it is paid off...
  • sweetdaisysweetdaisy Forumite
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    Well, I have just contacted HMRC. I informed them that I have received a PPI payout and that I am aware that I need to pay tax on the 8% interest ect, but . . . they initially didn't really know what I was talking about!

    I then got transferred to someone else who said that they have been unsure what to do about PPI, but for me to photocopy the letter I received from the Halifax, with the payment breakdown on it and send it off with a covering letter and NI number to the HMRC in Liverpool and they will look into it, and will let me know if they will adjust tax code/ask for it in full etc.

    So I am still a little bit none the wiser. I have another PPI claim in the process and waiting for a response from the Halifax, and if I am successful I will send both paperwork at the same time to the HMRC for them to decide what to do.
  • -SDW--SDW- Forumite
    137 Posts
    i.ve never known the tax man to know what they are doing
    HBOS charges..£7000.00 recieved.
    Egg cc..£1300 recieved.
    Barclaycard cc..£ 568 recieved.
    A&L loan..£1677 recieved..HBOS cc..£3500. HBOS.. loan £919.HBOS.cc charges. £1400 MPPI £21799 recieved
  • ok, im really dumb and I cant get my head around this. Some one please explain! My husband and i have received 2 payouts, one from barclays £9000 but we never recieved a letter with a breakdown, it was paid into our bank account and a letter sent saying hope this matter is settled. The second was paid from FSCS, £3500. Both were claimed using a company, as the one company had gone bust, and the barclays claim was from a long time ago, so they helped with the paperwork

    Is the amount paid 20% of the 8% of the total paid by each? Also, 25% was paid to Brunel Franklin, does the % also include money paid to them? Surely they would have paid tax on this money too?

    Apologies for the stupid questions, numbers were never my strong point, hence my debt!!
  • tifotifo Forumite
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    oldvicar wrote: »
    People who earn(ed) enough to take out and repay a loan are not taxpayers? Crazy world we live in !

    They might have earned enough many years ago but the refund and interest is paid THIS year and people might now not paying tax because of low income.

    Haven't you heard of the credit crunch and loss of millions of jobs?
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