Reclaim tax after receiving PPI payout...

PaulH70

Hi Everyone,
After watching Martin Lewis's show last night about reclaiming tax after receiving a PPI claim got me thinking.

My history goes like this, in the 90's I was heavily into having bank loans, 13 actually. Finally learnt my lesson on looking after my finances, Anyway these loans where with one bank that I'm currently with and all had some sort of PPI with them. Well in July 2016 I received a pay out of £6677 which I was shocked by but felt like I won the lottery, although this amount was the total of the various loans I had out.

The bank broke down each loan I had and stated the following:
PPI premiums paid
Plus 8% simple interest
Minus 20% income tax on total simple

My question is do I have a right to claim back the 20% interest on each loan or would I get stung by the HMRC for not telling them I received the above amount of £6677 in July 2016.

Advice would be much appreciated

uknick

Were you paying income tax on earned income when you got the payment? If so, were you a 40% or higher rate tax payer?

If the former, no refund due. If the latter, you might owe more tax.

BoGoF

uknick wrote: »

Were you paying income tax on earned income when you got the payment? If so, were you a 40% or higher rate tax payer?

If the former, no refund due. If the latter, you might owe more tax.

Not quite, you have the £1000 personal savings allowance (£500 if higher rate)

uknick

BoGoF wrote: »

Not quite, you have the £1000 personal savings allowance (£500 if higher rate)

Which is why I asked about earned income.

xylophone

https://www.litrg.org.uk/latest-news/news/180502-had-ppi-claim-and-low-income-if-so-read

dori2o

PaulH70 wrote: »

Hi Everyone,
After watching Martin Lewis's show last night about reclaiming tax after receiving a PPI claim got me thinking.

My history goes like this, in the 90's I was heavily into having bank loans, 13 actually. Finally learnt my lesson on looking after my finances, Anyway these loans where with one bank that I'm currently with and all had some sort of PPI with them. Well in July 2016 I received a pay out of £6677 which I was shocked by but felt like I won the lottery, although this amount was the total of the various loans I had out.

The bank broke down each loan I had and stated the following:
PPI premiums paid
Plus 8% simple interest
Minus 20% income tax on total simple

My question is do I have a right to claim back the 20% interest on each loan or would I get stung by the HMRC for not telling them I received the above amount of £6677 in July 2016.

Advice would be much appreciated

It's only the interest which is applicable to HMRC. The refund of the premiums is not taxable income, it's simply what it says it is, a refund of premiums you were not due to pay.

The only part of the lump sum payment you have received that HMRC is interested in is the interest.

If your total taxable income and employer benefits income for the 2016/17 was £43,000 or less then you will have a 0% rate band for interest of £1000.

If your income was more than £43,000 then you will have a 0% savings income band of £500.

If your income is higher than £150,000 then the 0% band is £0

If you have a much lower income then you might be able to benefit from the £5000 savings starter rate as well as the 0% rate band.

The savings starter rate gives you upto £5000 interest tax free on top of your personal allowance.

Every £1 of income above the personal allowance (11,000 for 2016/17) upto a maximum of £5000, reduces the savings starter rate by £1.

E.g. If your other income excluding the interest for 2016/17 was £13500 then you would have a savings starter rate of £2,500 remaining plus the £1000 0% band, meaning you could potentially have £3500 of tax free interest.


OP, in order for someone to tell you what if any tax is due to be paid or refunded we need to know what your other taxable income was, and what the total value of the interest you received was, as well as the total tax paid on the interest.