PPI & Overcharged Income tax

moneywise_mum

Please excuse if this is not the right place for this post. I have never posted before - so total newbie. I was delighted to get a successful claim for PPI mis-sold by Lloyds last year for a credit card account. (Thanks to the MSE advice). Now it seems to me that the payment is made up of 3 parts - namely repayment of the PPI premiums, the repayment of the interest they charged me to my credit card account and finally the payment of the statutory 8% simple interest - as compensation for interest not received if I had the capital invested. It also seems logical to me that the income tax should only be paid on the 8% interest, as that is the money that I would have paid tax on if the money had been in savings and earning interest. However, although Lloyds are very vague about how they calculated the repayment: it looks as if they paid tax to the HMRC of 20% of BOTH types of interest. Has anyone else who has had a repayment noticed anything like this. I can't believe that I am the only one.
Getting a breakdown of how they calculated the figures is very difficult.
The claim had to go via FOS and took about 3 years - and there is an ongoing dispute about some of the figures.
Any thoughts or advice really welcome.

Nasqueron

If you earn less than the tax free earnings limit you can claim interest back from HMRC. If you are over that you get taxed on the interest then the government keeps it.

If you think the figures are wrong complain to Lloyds and ask them to explain it

Dazed_and_confused

Nasqueron

You are somewhat out of date

If paying tax but a lower earner the op may be able to benefit from the savings rate band where up to 5000 of interest is taxed at 0% instead of 20%.

In addition most people who are basic rate payers will get the personal savings allowance rate band to use against their interest, effectively another £1000 taxed at 0%.

The op needs to establish what the correct figures are first but if the payment was made after 5 April 2016 there is a strong chance some tax may be reclaimable

Nasqueron

Dazed_and_confused wrote: »

Nasqueron

You are somewhat out of date

If paying tax but a lower earner the op may be able to benefit from the savings rate band where up to 5000 of interest is taxed at 0% instead of 20%.

In addition most people who are basic rate payers will get the personal savings allowance rate band to use against their interest, effectively another £1000 taxed at 0%.

The op needs to establish what the correct figures are first but if the payment was made after 5 April 2016 there is a strong chance some tax may be reclaimable

Maybe, maybe not, I must confess I misread the date, I thought it was stated clearly before the £1000 PEL came in. It would indeed depend on whether the payout was after or before

moneywise_mum

Hi, thank you all for the information. The repayment was made last year in March (2016) - so as I understand it- the new allowance was not in force so the tax is due in full. I am waiting for Lloyds to write giving their explanation / breakdown of the figures, as the amount sent to HMRC seems comparatively large. (Hopefully this explanation will be more enlightening than their last one over their main calculation - when they sent a printed sheet that required a magnifying glass to read.)