Tax on PPI Compensation Interest

GaryJH

Halifax are refunding PPI premiums, plus 8% interest, on our joint mortgage. The cheque will be made out to both me and my wife so will be have to be paid into our joint current account. Obviously, we will have to declare this to HMRC and pay tax on it. As my wife pays tax at 20% and me at 40% is it acceptable for my wife to declare all of the interest as her income and for me not to declare anything? This also makes sense as my wife actually paid all or most of the PPI premiums. We don't want to pay more tax than we have to but don't want to do anything wrong. Could anyone please advise. Very many thanks. Gary

dunstonh

As my wife pays tax at 20% and me at 40% is it acceptable for my wife to declare all of the interest as her income and for me not to declare anything?

No. Its treated the same way as a joint savings account. 50/50.

panchenlama

are you trying to avoid paying the right amout of tax?

what is the difference between what you're trying to do here and what Vodaphone, etc all try to do?

funny isn't it......

GaryJH

Thanks for the replies. Just to clarify, we're not out to break any rules; as explained in my OP, I was just trying to establish what the rules actually are, so that we end up paying the right amount of tax but not more than necessary.

Thanks dustonh for confirming that the tax on the interest has to be split 50/50. Does that apply even if, as in our case, one partner contributed more to the PPI premiums than the other?

dunstonh

Does that apply even if, as in our case, one partner contributed more to the PPI premiums than the other?

Its untested at HMRC. You may get away matching the split to how the PPI was split. i.e. if the PPI was split 80/20 for cover then you may get away splitting the interest the same way.

GaryJH

Thanks again dustonh, that's very helpful.

Merry Christmas!