Reclaiming PPI and tax implications and child benefit Question

MissMCA · 27 September 2013 at 2:08PM

Hello

I wondered if anyone can help me.

I've been successful in reclaiming PPI from a number of credit cards and loans that I had in the past. I managed to get over 10k in total, however just over 5k of that was interest.

In the letters that I got from Egg and Natwest, they deducted 20% tax out of the interest I received, which I'll be honest wasn't even something I thought about until Barclays wrote to offer me a small sum, advising that I was liable to inform the tax man and pay the tax on the interest. I haven't done it yet as I haven't been paid it yet!

So I have a few questions which I hope someone can help me with.

First of all, do I need to inform the tax man of the money I have been paid so far, despite the tax having been paid by the banks before I got the money?

I believe they paid at 20%. I do pay a higher tax rate on my annual earnings, as I believe that anything over something like 32k (after your personal allowance has been deducted) means that I will pay a higher tax rate. So, I am earn a few thousand over that, which means that I will be taxed 40% on that amount over a year.

Anything on top of that I assume will be charged at 40%, so potentially I could still have money owed? Even if at this point in the new financial year I haven't earned that amount?

My next question relates to Child Benefit (CB), and whether this will affect it. My base salary even with annual bonus means that I earn less than 50k, so I shouldn't have to pay a tax on CB. However, with the interest I was paid from the PPI payouts, if it gets included as an income, it means that I will have earned over 50k, assuming I am still in work by the next financial year. So does this mean that I would be liable to pay the CB tax also?

I had a pay rise in July so technically I would have been on a lower salary for the start of the tax year, and my rough (probably terrible) maths is on the basis of a full year at my current salary, but we aren't talking a massive rise, and I believe I would still be over 50k even if I hadn't had it.

Does this mean that I will need to complete a self assessment tax form as well?

It's very confusing and seems to be unfair if it does, and although I am very lucky to have got the money back that I was mis-sold, I almost see it as a bit of a poisoned chalice, as although the money has and will come in handy and I'm grateful for it, there seem to be further implications that could potentially affect me for the rest of the year.

Any advice gratefully received!

Kind regards

Miss MCA