Tax on repayment

Taff45

I recently received a payment from NatWest for a mis-sold packaged bank account. The claims company I used charged me 8% on top of their fees and said it was taken on behalf of HMRC.

1. I understand the 8% interest is taxable...but they took the entire 8%.
2. Also, how do they know my tax status and how much I owe.
3. I think NatWest may have already deduced the tax.

Anyone else had this issue?
Thanks

dunstonh

The claims company I used charged me 8% on top of their fees and said it was taken on behalf of HMRC.

they shouldnt. The bank do that.

I understand the 8% interest is taxable...but they took the entire 8%.

Again, that is not correct.

Also, how do they know my tax status and how much I owe.

They dont. That is why the bank deduct it as basic rate and any return of tax or extra tax is handled by self assessment.

Nasqueron

1) You pay tax at 20% on interest (just like non-ISA savings account) - it's only on the interest element though, not the refund of fees.
2) It doesn't matter, they do it automatically to save you getting a huge bill from HMRC for not declaring it yourself. If a higher rate taxpayer you have to declare this and pay full tax.
3) If you are a non-taxpayer you can claim it back in the usual way. You will have to query with the bank to see if the deducted tax at source - if so you can ask the claims company for that money back

Taff45

Thanks for the input.....although you say it doesn't matter what my tax status is, I don't live in the UK. I live in Switzerland and pay tax here....and there is a Double Taxation Agreement with the UK. But they never bothered to ask about that.
Surely if I did live in the UK...it would be included on my Self-Assessment or I would get my Tax-Code adjusted.
It seems rediculous that they take 8% that's 100% of the interest?

dunstonh

although you say it doesn't matter what my tax status is, I don't live in the UK. I live in Switzerland and pay tax here....and there is a Double Taxation Agreement with the UK. But they never bothered to ask about that.

And you deal with it via your tax return in the appropriate tax regime you fall under.

Surely if I did live in the UK...it would be included on my Self-Assessment or I would get my Tax-Code adjusted.

You would not get your tax code adjusted. You would handle it via self assessment if you were not a basic rate taxpayer. Just as you will now handle it via the tax returns in Switzerland.

It seems rediculous that they take 8% that's 100% of the interest?

They dont. The claims company is giving you duff information.