PPI Reclaiming successes and failures

turbo.jet

It is definitely a gross payment rather than net. The interest in my payout totals £2118.68. My salary is just under 35K, and I salary sacrifice into my pension so I imagine it'd be difficult to determine whether to tax it at 40% or 20%. I really have no idea how it works. 40% of this is £847.47. I wonder if this will be too high to incorporate into my tax code. That would be my preferred option rather than a lump sum payment. As it stands I can become debt free with the refund. If I have to keep back £847 for the taxman I'll still be in debt for a while.

dilus

turbo.jet wrote: »

It is definitely a gross payment rather than net. The interest in my payout totals £2118.68. My salary is just under 35K, and I salary sacrifice into my pension so I imagine it'd be difficult to determine whether to tax it at 40% or 20%. I really have no idea how it works. 40% of this is £847.47. I wonder if this will be too high to incorporate into my tax code. That would be my preferred option rather than a lump sum payment. As it stands I can become debt free with the refund. If I have to keep back £847 for the taxman I'll still be in debt for a while.

I'm no tax expert but it sounds like you will have to declare it one way or the other, through your tax code would be favourite in your case as you say. A phone call to HMRC sounds the best option to find out for certain.
Congratulations on your success btw :T

dilus

The last thing you want is for this to push you over the 20% tax threshold for the year. Which it obviously will do so you would have to pay 40% tax on anything over £35,001

turbo.jet

My salary is something like £34,8xx so I think it will, I'm not sure if the salary sacrifice changes this, because I know they make the contribution to my pension before they calculate the tax. Also, I've had a few overtime payments this year.

It may be the last thing I want but there's nothing I can do about it I think

dilus

turbo.jet wrote: »

It may be the last thing I want but there's nothing I can do about it I think

Very true, isn't it typical you win back money that is legitimately yours and the tax man is over you like a rash :mad:
Better to stay on their side though whilst you have the money to do it, rather than get a nasty shock months down the line

dilus

You could argue with the tax man that this is money you have paid out over a long period of time and that it's unfortunate that you are getting it back in one hit, there may be case for only having to pay 20% on it, I don't know.

turbo.jet

Well I shall try and turn on all my charm when I ring them tomorrow.

If I understand it correctly (which I don't really) this isn't money I've paid - that's listed seperately. Its interest on my money which they essentially were holding for me. I agree about being honest and up front now though - I definitely don't want to get stung in January 2013 when they'd finally catch up to it. Who knows what my situation will be then.

cagey26

turbo.jet wrote: »

My salary is something like £34,8xx so I think it will, I'm not sure if the salary sacrifice changes this, because I know they make the contribution to my pension before they calculate the tax. Also, I've had a few overtime payments this year.

It may be the last thing I want but there's nothing I can do about it I think

Hi there
I can't comment exactly, as I don't know your exact circumstances, but if your salary is your only income, then you may well stay within the basic rate band.

£0-£35,000 is taxed at 20%

Most people have a tax free personal allowance (normally indicated by your tax code). The standard PA is £7,475 this year, but people's individual amounts can vary.

Assuming you have the standard tax code, the first £7,475 of your income would not be subject to tax. So for an annual salary plus overtime of £40,000, say, you deduct £7,475 leaving £32,525 to be taxed. As this is below £35,000, it is all within the 20% tax band.

In addition Pension contributions attract tax relief, so you do not pay tax on the element of your salary that you pay into your pension scheme. This reduces the "taxable" pay in the example above to less than the £40,000 to start with.

Obviously it is all down to individual circumstances, but check it out and you may well find that you will be paying just at the 20% rate

Good luck and congratulations on the win too
KG

turbo.jet

Hi KG,

Thanks (I didn't see your response before my previous reply).

That's really useful - thank you for pointing that out. I think my overtime has worked out to be about £600 net so far this year. My tax free allowance is £6,641 (664L). With the salary sacrificing its really hard to know whether it'll be 20 or 40%, but it sounds like if I manage to get them to build it into my tax code I won't feel too much pain from the extra tax each month.

Thanks again.

PS... don't suppose you or anyone knows if there is a form I'll have to complete to send to the HMRC? I know they'll tell me when I call but I'm just looking into it now to be forearmed.

di3004

Well done on your success Turbo.Jet.:beer: