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

unholyangel

Brisbaneroad said:

No I'm not c0nfused, I understand that it is the interest that is taxed. And as I stated, I didn't see anywhere in the online form to say what amount I was claiming, or what it was for. Perhaps I missed something.

Buy a "long period" I mean that most of it was before the tax-free savings limit was introduced. But you have clarified that that isn't relevant as the repayment was since that rule came in, so thanks for that. I am writing back and hopefully that will sort out the refund.

There is a question that asks if you had any savings income, what did you answer to that question? Given the R40 is to reclaim tax overpaid on savings & investment income, the answer to that question should be yes. 

ComradeK

Hello. Any help appreciated. Thank you in advance.

Got a PPI refund totalling £750.66 in the 2018/2019 tax year.

Income for 2018/19 was £16742.11 and I paid £976.40 in income tax (tax code 1185L). I've no other income except for the £750.66 PPI refund, and no savings anywhere or interest earned apart from a few pence on my current account balance over the year (is that important?)

I'm trying to fill in the online R40 and I'm not sure what to put in the following boxes in the UK Interest section:

3.1 Net interest paid by banks, building societies etc, purchased life annuities and PPI payments – after tax taken off

3.2 Tax taken off

3.3 Gross amount – the amount before tax taken off

In my PPI refund letters I am informed that I paid £75.47 in "income tax deduction - this is the value of 20% income tax deducted from the statutory compensation" to HMRC. Interest on refunded comission is £151.88.

How do I fill this section in? I guess any refund is pretty small but every penny helps. Thank you.

Dazed_and_C0nfused

Based on your post it would be,
3.1 = £301.88
3.2 = £75.47
3.3 = £377.35

The interest will be taxable at 0% so after deducting the small amount you owe on your PAYE income you should get a refund of £73.47.

ComradeK

Thank you. How did you work that out?

Dazed_and_C0nfused

You said the tax was 20% (which is what would be expected).

So the taxable amount would be 5x that.

5 x 75.47 = £377.35

Net is gross (£377.35) less tax (£75.47)

PPI refunds aren't actually taxable, it is just the statutory interest/compensation that is taxable.

I've no other income except for the £750.66 PPI refund, and no savings anywhere or interest earned apart from a few pence on my current account balance over the year (is that important?)

The £750 isn't income for tax purposes.  Just the £377.35 statutory interest/compensation.

You could get a maximum of £1,108 interest taxed at 0% so even if you got a pound or two from your current account it won't alter the amount of tax refund due.

ComradeK

Nice one DC. That makes sense. Thank you again.

SusanBautista

Hello, please Help. I am filling up the R40 but I do not know what to fill in these boxes
Net interest paid by banks, building society etc, and PPI payments?
Tax taken off the gross interest paid by banks, building societies and purchased life annuities?
Gross interest paid by banks, building societies and purchased life annuities?
Tax year: 06 April 2017 to 05 April 2018
Total pay for employment on my P60 before tax was taken =  £30028.73
Tax taken off total employment on P60 was = £3675.80
I have a PPI net refund from my credit card = £6518.20  ( cheque was issued )
The details on the summary are:
HMRC Tax =  £ 145.18
PPI 8% interest = £ 725.93
PPI Refund =  £ 1835.13
PPI Interest Refund = £ 4078.32
I do not understand how to work it out what number/amount to write in the boxes;
3.1 = ?
3.2 = ?
3.3 = ?
I have approached an accountant office in my area but they want 20% from what I will get, if I get a refund best to give to children in need or to British heart foundation.
Many thanks for your help, really appreciate.
Sue
ps. I have no savings = 00

Dazed_and_C0nfused

HMRC Tax =  £ 145.18 = tax deducted
PPI 8% interest = £ 725.93 = gross interest

Take the gross interest and deduct the tax deducted figure to give the net interest.

Based on your post you can expect to get a refund of £115

SusanBautista

Hi Dazed, thank you for your help.
May I ask how did you get £ 115 ?
Have a nice day # be nice.

Dazed_and_C0nfused

Tax year 2017:18

Taxable salary £30,028
Taxable interest £725
Total taxable income £30,753

Less Personal Allowance £11,500
Income to be taxed £19,253

£725 x 0% = £0.00 (savings nil rate of tax)
£18,528 x 20% = £3,705.60 (basic rate)
Total tax owed = £3,705.60
Less PAYE tax £3,675.80
Less tax on interest £145.18
Tax overpaid = £115.38

All of the above assumes you
a) haven't forgotten to mention something relevant like company benefits
b) had no untaxed interest greater than £275 in that tax year

c) aren't Scottish resident for tax purposes in 2017:18