Tax on PPI interest

Deedles47

Hi,

Thanks to MSE I have had 3 payouts for PPI. I am aware of the requirement to pay tax on the 8% interest. Two have had the interest paid in full direct to me. The other from MBNA has had a 20% UK "witholding tax" deducted from the interest payment.

Any opinion on how best to advise/pay tax man so I don't end up having to fill in tax return each year again. Do I advise HMRC now or at end of the year when I will have a better view of any others that may come through ( potentially 2 other claims just started) . My tax affairs are pretty simple overall. One job, PAYE , higher rate tax payer, company car, and health insurance deduction from tax code.

And I guess any way of reducing the tax take on the 3 payments?

Thanks

xylophone

http://www.hmrc.gov.uk/news/ppi-advice.htm
"If the customer is a higher rate taxpayer who has received interest with or without tax deducted or a basic rate taxpayer who has received interest without deduction then the interest should be declared to HMRC in the normal way."
http://www.hmrc.gov.uk/incometax/code-underpayments.htm

dori2o

Deedles47 wrote: »

Hi,

Thanks to MSE I have had 3 payouts for PPI. I am aware of the requirement to pay tax on the 8% interest. Two have had the interest paid in full direct to me. The other from MBNA has had a 20% UK "witholding tax" deducted from the interest payment.

Any opinion on how best to advise/pay tax man so I don't end up having to fill in tax return each year again. Do I advise HMRC now or at end of the year when I will have a better view of any others that may come through ( potentially 2 other claims just started) . My tax affairs are pretty simple overall. One job, PAYE , higher rate tax payer, company car, and health insurance deduction from tax code.

And I guess any way of reducing the tax take on the 3 payments?

Thanks

How much is the total interest (i.e. the gross) you have received from the PPI?

Deedles47

dori2o wrote: »

How much is the total interest (i.e. the gross) you have received from the PPI?

Hi,

£3200, gross interest

One payment , £1670, with 335 deduction
One payment , £800 no deduction
One payment £730 , no deduction.


Total tax liability at 40% is £1280, , £335 paid by company already so £945 left to pay. Looking for most efficient way to pay it. i could pay it out straight away... But would like to keep it earning something if possible

Thanks

kkgree1

I declared my PPI interest to HMRC back in April. I have about £185 to pay as I got a £2500 payout (without tax deducted).

I have asked to be sent a bill to pay it directly but I understand you can also pay it through PAYE over several months if it's easier.

I don't know how long they take to process such things but they were waiting for my P60 when I last checked (I presume to confirm I'm a basic rate taxpayer) before they can send out a bill.

In the meantime, it's earning interest sat in my ISA!

Deedles47

kkgree1 wrote: »

In the meantime, it's earning interest sat in my ISA!

that's one of the things I was thinkng

dori2o

Unfortunately as the amount is more than £3k you have no choice but to register for self assessment.

Once you have done this form, assuming you meet no other SA criteria, then the following year if you receive a form then you can object to the issue of the form and have the record closed down by calling HMRC to register your objection.

Dazed_and_confused

dori2o wrote: »

Unfortunately as the amount is more than £3k you have no choice but to register for self assessment.

Once you have done this form, assuming you meet no other SA criteria, then the following year if you receive a form then you can object to the issue of the form and have the record closed down by calling HMRC to register your objection.

OP has mixture of taxed and untaxed interest so I don't think he would have to complete a tax return for the amounts he has quoted however there may be advantages to this in his eyes!

Assuming interest was all paid in this tax year then he would get tax return in April 2014. Fill this in by December (?) 2014 and the tax due, assuming £945 quoted is correct, could then be collected through the tax code for 2015:16 so the tax wouldn't be paid off until March 2016!

Deedles47

Dazed_and_confused wrote: »

Assuming interest was all paid in this tax year then he would get tax return in April 2014. Fill this in by December (?) 2014 and the tax due, assuming £945 quoted is correct, could then be collected through the tax code for 2015:16 so the tax wouldn't be paid off until March 2016!

Interesting, thanks , might be the way to go