will ppi refund count as income and effect tax credits

thefishdude

so may be getting a ppi refund of about 3k, was wondering will this be counted as income for my tax credit renewals in couple of months ?

cattermole

My understanding is that it is not income because it is money you have paid out in the past from your income which is being refunded.

On that basis we would all have to pay tax on it when it was refunded if it took us over our tax allowance.

Bubbles is correct about interest as any gain on capital is income.

thefishdude

thanks for swift reply, i new about the tax thing as i was told about that, have to pay tax on the interest wich is fine. just asnt sure if it effected tax credits.

cattermole

blondebubbles wrote: »

The 2 things generally tie together, tax credits look for your taxable income. As it's the interest that's taxable, that's what you declare.

Another thing is on my PPI refumd just looked at it they deducted the interest for tax off the settlement figure. Presumably this means if you are not a tax payer you can claim it back? Sorry a little off topic as this is to do with tax credits. But was just wondering.

letthemeatcake

When I phoned tax credits I told them about the ppi payout and they only wanted to know about the bit that had 8% interest. In the end it didn't alter our TC payments (it was about £2000 interest)

ALIBOBSY

cattermole wrote: »

Another thing is on my PPI refumd just looked at it they deducted the interest for tax off the settlement figure. Presumably this means if you are not a tax payer you can claim it back? Sorry a little off topic as this is to do with tax credits. But was just wondering.

Yes you can, either through your yearly tax declaration if you do one or as a refund claim (r40 form).

Ali x

menollyke

cattermole wrote: »

Another thing is on my PPI refumd just looked at it they deducted the interest for tax off the settlement figure. Presumably this means if you are not a tax payer you can claim it back? Sorry a little off topic as this is to do with tax credits. But was just wondering.

Yes there is a form to claim it back from HMRC if you are not paying tax or are still under your tax free allowance. Not sure what the form is called from the top of head.

And yes the interest would be counted as income for tax credits purpose, not the PPI refund part.