Martin Lewis: Had a PPI payout? If so, you can reclaim the tax on it

Dazed_and_confused

Having read Martin's piece about being able to claim back up to £1000 tax under the new savings allowance introduced in 2016 (which includes tax paid on PPI refunds)

There is no such article.

There is a £1,000 tax band where interest is taxed at 0%. Which would save a basic rate payer £200 (£1,000 x 20%).

There is also a £5,000 tax band where interest is taxed at 0%. This depends on what non savings income you have (pension, wages, rental income etc) and for some basic rate payers they have too much non savings income to benefit from this (in the current tax year this would usually be £17,500).

They offered me £621

You don't negotiate on things like this. Either the calculation is correct or it isn't.

I have no other income from the tax year in question

and receive a work pension where tax is deducted at source and a state pension

So you do have other income.

Martin Lewis was wrong!

You have misunderstood him.

Chances are the refund is correct. You probably got the benefit of some of the £5,000 rate band and the £1,000 rate band. Otherwise you would have only got c£200.

If you disagree feel free to post details of the calculation HMRC sent you.

peony1gardens

Martin has written a blog about claiming back tax on a PPI payout.
By 'no other income' I meant income from paid work which is taxable. On the R40 form there are separate categories for income and pensions.
I think I understand now about the savings free allowance with regard to PPI payouts but it is very confusing. See Sunday Times article about this topic on January 19 2020 which is headed ' Now victims of PPI mis-selling may be due £350m tax rebate' which ends up by saying that the tax rules applying to PPI compensation require clarification.

Dazed_and_confused

Nowhere in that blog does Martin Lewis say you can expect to get £1,000 tax back.

As you usually don't have to pay tax on savings interest unless you have taxable income in excess of £18,500 in the current tax year someone with no taxable income other than PPI interest could actually receive a tax refund of £3,700.

But most people will be due no more than £200.

Are you now happy that the HMRC calculation is correct? If not you can always provide more information.

whitesatin

I find myself confused by this too now. I received a PPI payment and paid almost £300 tax on it, deducted by the company who refunded me. I had no problem with this but am now wondering if I can claim it back. I have a state pension and work pension paying around £17k combined. I have premium bonds and ISAs but don't receive much interest on these. I await further clarification on this before I do anything.

It's a lot for an oldie like me to get my head around and I've already had some input on here from my queries which seem to change all the time. Anyway, I got the money, it's in the bank and I'm happy but would obviously not want to pay any more tax than I need to.

Dazed_and_confused

You can ignore the premiums bonds and ISA interest as that isn't taxable income.

You are probably due some of the tax deducted back but the exact amount depends on a few things, which tax year the statutory interest was received, how much untaxed interest you got from other sources such as your non ISA bank accounts and exactly how much your pension income is in the tax year concerned.

Best case scenario you might get the full £300 back, more likely £200 and possibly a bit less if you had some untaxed interest.

You would need to give a bit more detail to get a more accurate estimate.

whitesatin

Dazed_and_confused wrote: »

You can ignore the premiums bonds and ISA interest as that isn't taxable income.

You are probably due some of the tax deducted back but the exact amount depends on a few things, which tax year the statutory interest was received, how much untaxed interest you got from other sources such as your non ISA bank accounts and exactly how much your pension income is in the tax year concerned.

Best case scenario you might get the full £300 back, more likely £200 and possibly a bit less if you had some untaxed interest.

You would need to give a bit more detail to get a more accurate estimate.

Thanks. I’ve only just received the money, so this tax year. I guess I need to wait till I get my P60s or whatever one gets after April. I do know that I have no other savings apart from bonds and ISAs and only receive pennies on my bank account.

Dazed_and_confused

Ok, so let's say you have £1 of taxable untaxed interest. And £1,500 taxed interest.

If your taxable pension income was exactly £17,000 and you haven't applied for Marriage Allowance then the first £1,500 of the interest will be taxed at 0% so you would get £299.80 of the £300 back. If your pension income goes over £17,000 you will get a smaller refund, potentially reducing to £199.80

whitesatin

Sounds worth doing then. Thanks. I could do with some plants for the garden so the money would be useful to say the least.

Dazed_and_confused

When you come to complete the R40 remember it is for all of your taxable income.

So your pensions need to be included and the statutory interest received as part of the PPI payout.

The PPI refund itself isn't taxable income.

Something a lot of posters on here have clearly failed to realise.

Amma1981

I had a ppi payout but cant remember which year and cant find the statement. I know it was after 2014. How would I find it out?
Thanks