Tax on PPI interest.

CHEROKEE_CHARLIE

Can anybody help?
I have made several successful PPI claims.
At present I am paying the tax on the interest part
through my PAYE code. Everything so far has been fine, however due
to a change in salary part of my income is now being taxed at 40%
because of the reduction in tax code. If I had my usual tax free allowance (£10600) my tax rate would still be 20%
Is this normal? I understand I have to pay the tax on the interest
part of the PPI but because of the reduction in tax code I feel I'm
being penalised with having to pay part tax at a higher rate.
Is it possible to claim any of the tax back?

dunstonh

Is it possible to claim any of the tax back?

No.

You pay tax on it at your highest applicable rate.

CHEROKEE_CHARLIE

So, if I had paid the tax on the PPI interest in a lump sum my tax free allowance would be £10600. By paying through PAYE I'm still paying the tax on the PPI interest ( over 12 months) but because of the reduction in tax code, HMRC are also taxing me at 40%.
Still seems unfair, being taxed twice because of my decision to pay the tax on PPI interest through PAYE.

magpiecottage

The tax liability should accrue in the tax year in which the interest was paid, not the year in which the tax was paid.

If you are paying it by instalments via PAYE, your tax coding will have been adjusted to take account of this. It is possible that, because your marginal tax rate has changed the rate is no too high. If so, you could speak to your tax office and ask for it to be changed. Otherwise, it should come out after the end of the tax year but that is some months away.