PPi success - Taxation

rugbyant

Yippee!!

So I filled the Barclays online form and 4 weeks later I get a cheque through the post - which is from 2000-2007.

This has had 20% tax taken from the money, however I am a 40% rate taxpayer.

My question - do I have to pay the full difference in tax based on tax rate now or what it was for the period it has been paid for?

E.g if payment was from 10 years ago for let's say £1000, and I became higher rate 5 years ago, it's had £200 taken off. Do I pay £200 (difference between high and low tax) or £100 (difference, but also taking into account I wasn't a high rate) or no more as I was 20% tax rate during the period I had the loan????

Thanks,

[Deleted User]

If the tax taken is wrong you need to contact HMRC to pay the difference.

rugbyant

Difference based on today or based on a scale of when I became high rate?

[Deleted User]

http://hmrc.gov.uk

rugbyant

Helpful - looked there in the first instance and it doesn't state on which period the higher rate is paid.

[Deleted User]

If the tax taken is wrong you need to contact HMRC to pay the difference, Contact details at the link.

rugbyant

I'm not sure you understand my question.

I know the tax is wrong, it's at 20% and I pay 40%. However, the period of interest I'm receiving goes back to the year 2000 - when I wasn't a high rate tax person.

So I'll ask again - do I pay at 40%, regardless of timescales, or can I pay based on the years I have been high rate?

Insider101

The tax due is based on the position at the time you receive the payment. So unfortunately you would need to pay an extra 20%. Sorry to be the bearer of bad tidings.

dunstonh

So I'll ask again - do I pay at 40%, regardless of timescales, or can I pay based on the years I have been high rate?

You are taxed on interest in the tax year it is paid. Not when it was accrued.

[Deleted User]

rugbyant wrote: »

do I pay at 40%, regardless of timescales,

Yes. You are paying the tax now on interest you have received now, not twenty years ago.

When you visit the link I provided earlier, you can both confirm this and arrange the additional payment.

daniel86_2

The interest only on the refund is taxable based on the date your received the interest payment which would need to be declared to HMRC as it is a current income

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim2105