MBNA PPI - Tax query on refund

KatherineKat

Hello, apologies if this is in the wrong place.

I've just had an MBNA PPI complaint upheld on an account I'd opened in 2000, and the letter I've had come through has broken it down quite well but has raised more questions to do with tax. It listed the following in the breakdown:

Total amount of PPI premiums charged since sale date:
Total amount of fees refunded:
Total amount of associated interest:
Applicable 8% gross interest:
Less UK withholding tax:
Total amount payable to you:

On the bit about the 8% gross interest it has a separate bit of text which says an amount (a few £ over 1k) has been deducted, and I may need to inform HMRC regarding it.

This is the bit I'm struggling with; it looks like the tax I needed to pay on the amount back has already been taken off and MBNA will pass this on as required. However I have had various people tell me that as the 8% gross interest amount being taking off my total is over £1000 than I have to declare it (it's over by less than £5, typical).
I've never really had an amount like this (over 10k) suddenly appear before and I'm proper worried I'll miss something and get chased by HMRC for fraud or something if I don't deal with it properly.

Help?

Nasqueron

A lower rate tax payer (20% band) can earn £1000 of interest (combined, from all sources including savings) per tax year without paying tax under the PSA


https://www.moneysavingexpert.com/savings/personal-savings-allowance/



Speak to HMRC about it as you may need to do a self assessment, however, you can claim the interest on the sub £1000 back using form R40

Dazed_and_confused

You are more likely to be owed some of the tax back than owe extra tax.

It all depends on what other income you have but you could potentially have upto £17,850 in interest before any tax is payable.

That figure is reduced the more other income you have but unless you are a higher rate taxpayer the first £1,000 of any interest you receive (including the PPI interest) is taxed at a 0% tax rate

So you could well have say £1,005 interest and have paid £201 tax on it but only actually owe £1 in tax, not the £201 already deducted.

If your total taxable interest is less than £10,000 you are unlikely to need to complete a Self Assessment tax return (assuming you don't already have to file one) but you can use form R40 (a different type of annual tax return) to claim any refund due.

You will need details of all your other taxable income in the year to be able to complete the R40. It is not just for you to enter details of the PPI interest, it is for all your taxable income.