Paying Tax on 8% Interest

Fenser

Hello,

I have today received a letter to advise my PPI claim has been upheld :j

It covers 3 loans over several years. I have been reading that the refund should have 3 elements;
1 Refund of premiums, 2 Interest paid on premiums and 3 Additional interest @ 8%.
However my letter only quotes 2 elements;
1 PPI redress, 2 Statutory interest @ 8%. Is this of no consequence?

On two accounts the 8% interest is as high as the refund of premiums. On the other it is higher! Would this be because the original loans were a while back?

I realise there is tax payable on this 8%. This money was taken from and is being repaid into a joint account, so does it matter which one of us declares it for tax purposes? We are both retired.

Hoping someone can advise me please.

dilus

Fenser wrote: »

Hello,

I have today received a letter to advise my PPI claim has been upheld :j

It covers 3 loans over several years. I have been reading that the refund should have 3 elements;
1 Refund of premiums, 2 Interest paid on premiums and 3 Additional interest @ 8%.
However my letter only quotes 2 elements;
1 PPI redress, 2 Statutory interest @ 8%. Is this of no consequence?

On two accounts the 8% interest is as high as the refund of premiums. On the other it is higher! Would this be because the original loans were a while back?

I realise there is tax payable on this 8%. This money was taken from and is being repaid into a joint account, so does it matter which one of us declares it for tax purposes? We are both retired.

Hoping someone can advise me please.

Hi Fenser,
You don't always get 3 elements in your redress. Some banks state the interest on the PPI separately some include it in the PPI.
The fact that the 8% figure is as high or higher I can only imagine is due to the fact that the loans were over a long period of time and the PPI in question was extremely expensive. I have seen some peoples PPI alone costing £120 + per month, this is when the 8% figure ramps up.
I am not sure about retired people and tax (I haven't quite got there yet) but you only pay tax on the 8% figures if you are a tax payer and it is at the same rate ie 10% 20% 40% or 50%

Fenser

Thank you Dilus for your help and reply.

My husband is a non tax payer and I will be liable for tax for year 2012-2103 by just £11.00. So I I will contact HMRC and see who is liable or if it is a joint liability.

I was surprised at the 10% tax rate you mentioned as I wasn't aware of it. I looked it up and note that it is for interest on savings up to a certain amount. Therefore if the 8% for PPI is given as interest that could have been earned in a savings account, could tax be deducted at 10% and not 20%? Apologies in advance if this is me being really thick!