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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  • tifotifo Forumite
    1.2K Posts
    Part of the Furniture 1,000 Posts Combo Breaker
    ✭✭✭
    If we've spent (example 6 hours) reclaiming the PPI and interest and have had to print and post letters or call them then this is a legitimate expense. We've had to spend money to get the income (interest).
  • I received a PPI payment of £5000 from Egg. However I had defaulted on a loan and I am currently repaying the debt via an arrangement with Consumer Credit Counselling. I never actually received the money as Egg paid it straight to the debt recovery company against the debt owed. How do I stand regarding the tax situation, as I never physically received this money and at the time was unaware of any tax liability?:(
  • Oneday77 wrote: »
    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.

    Here is a curved ball..............

    This is being taxed on the asumption that the mis-sold funds were sitting in a bank account.

    Then if the £5,000 that my bank have offered me were sitting in my account all these years, then.......

    I would not have needed the overdraft facility, paid the fee for it and incurred £7,000 of charges to the bank in returned checks, unpaid direct debits and exceeding overdraft charges for the past 6 years..I am going to re-claim on the grounds of the bank puting me in a position of hardship.
  • I have been working in financial services complaits for seven years, and in the law before that. This is the first time I have ever heard that the statutory interest has been taxable; it has always been held to be tax-free like the rest of the compensation - it is, after all, your own money being returned to you.

    It sounds far more like George Osborne has discovered a new stealth tax and has the brazen cheek to try to claim it retrospectively. Gordon Brown would be proud of you George!
  • MSE_GuyMSE_Guy MSE Staff
    1.7K Posts
    I've been Money Tipped! Newshound! Chutzpah Haggler
    Laura Whateley, a money journalist at The Times, is looking for a case study of someone who has waited longer than 28 days for a PPI refund, or someone who was surprised that they were taxed on their PPI compensation... please contact her at [EMAIL="laura.whateley@thetimes.co.uk"][email protected][/EMAIL]. Ideally, she's looking for someone prepared to be photographed this week.

    Many thanks,
    Guy
  • katherinelckatherinelc Forumite
    31 Posts
    10 Posts
    Hi im having a bit of trouble working this out !!! my breakdown isnt in 3 parts just 2 e.g - loan 1 - refund of premiums £788.67, interest at 8% £362.22 loan 2- refund of premiums £122.05, excess balance and interest £442.71 loan 3 refund of premiums £14.12, excess balance and interest £195.66 the offer of excess balance and interest is due to the loans 2 and 3 being refinanced from loan 1 with PPI which meant i paid more interst when making repayments on the next loan. How am i supposed to know how much 8% is for tax purposes and more to the point how is £362.22 8% of £788.67 ? I currently earn about £200 below the tax limit so that is £40 of extra tax covered but i am trying to work out how much more i will have to pay. Does anyone have any ideas please ???
  • I've just had a PPI payout and I'm struggling with the tax element.

    The Govt say it is because they assume that the money would have been in a savings account, however, a savvy saver would surely have made best use of their ISA and TESP allowances to save tax on their savings thus tax would only be payable on any income that resulted from a payout of more than the total of the ISA and TESP allowance surely?
  • i have just recieved a letter from my bank with an offer of a refund in which they have advised me that the taxman will be informed of my intrest. i claimed my ppi using a claims company can i offset their fee with the tax i owe? any help will be very welcome.
  • MEDIAMEDIA Forumite
    2 Posts
    Hi Folks

    For PAYE people.

    First - read the cover letter that comes with your PPI settlement and the statement. It should provide a breakdown of the pay out. if not ask for one from your lender.

    If they have paid the interest it will tell you. If not it will say something like 'please note the *% per annum simple interest payment has been made gross' Therefore no deduction has been made and you have to pay it.

    The simplest way is to call up HM Revenue and Customs and inform them of the situation. You are making them aware of untaxed income. They know all about PPI and in this case it is 20% of the 8% per annum simple interest figure.

    You can set it up so that your tax code changes and they take it out of your monthly earnings until it is paid. You can ask then to do it at a set amount.

    Self Employed People

    You simply add the total figure for the Untaxed Earnings box in the Self Assessment return. Make sure you add a note in the Any Other Information box and they'll add it to your tax bill. Save the amount alongside your normal tax return and your done.

    Word of Warning

    If you don't declare it - be very careful in making the decision not to, HMRC are aware of the PPI payouts and do seem to prosecute these days for what could be considered small amounts.

    Hope that helps.
  • xxnoanxxxxnoanxx Forumite
    10 Posts
    Eighth Anniversary Combo Breaker
    My husband received a letter upholding his claim. It states that the 8% interest is gross which I know means, he has to pay mr taxman himself. what i dont understand is on the breakdown letter, there are 4 loans, 3 of them have the refund amount and the 8% interest but the very 1st loan has:

    Refund of premiums XXX
    8% Interest XXX
    Total XXX

    Why does it have XXX in the boxes and not the actual figures? Im now not sure what amount we are supposed to pay HMRC as only 3 loans have figures. Please can someone help because I dont want to end up that we havent payed enough tax.
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