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

jam1eg

Oh - I thought I was in the higher rate limit after today's call with HMRC, originally I thought the high start point was 45k - I've also seen this https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2017-18/tax-and-tax-credit-rates-and-thresholds-for-2017-18 since the phone call with HMRC.


So based on my figures am I wrong to be claiming £524?  my thoughts were I shouldn't have paid tax on my interest earnt / payed out due to this personal allowance?   I'm not finance based or anything just a joe bloggs have a go as it looks right.

Or should I have claimed a different amount?   It is worth detailing all my PPI amounts back etc. so this can been looked at with a fuller view?

Appreciate your time on this and your knowledge.   

jam1eg

Am I reading this wrong but this still states £33500

"Income tax on earned income is charged at three rates: the basic rate, the higher rate and the additional rate.  For 2017/18 these three rates are 20%, 40% and 45% respectively.  Tax is charged on taxable income at the basic rate up to the basic rate limit, set at £33,500. ‘Taxable income’ excludes personal allowances, which represent the amount of money someone may receive free of tax. Tax is charged at the higher rate on taxable income between the basic rate limit and the higher rate limit, set at £150,000. The additional rate is charged on taxable income over £150,000. All three tax rates are unchanged from 2016/17.
The personal allowance is increased by £500 to £11,500 for 2017/18. The basic rate limit is increased by £1,500, so that the higher rate threshold – the point at which individuals become liable to pay tax at the higher rate – is set at £45,000 for 2017/18."

This contradicts itself no? but the HM Gov website states about 33,500 is 40% to 150000

Dazed_and_C0nfused

I don't know if you've got a different R40 to the one on gov.uk but there is nowhere on an R40 to claim a specific amount.

An R40 is like a simple tax return.  You include all your taxable income on it and HMRC calculate any refund based on that. 

Or as seems increasingly common they either send it back as its not been completed very well or they send people a bill as they have included (non taxable) PPI refunds on the form, not just the statutory interest.

If your total taxable income is definitely within the higher rate tax band and you didn't have any other interest from (non ISA) bank accounts etc hen the interest would be taxed like this,

£1,000 x 0% = £0
£1,621 x 20% = £324.20

Total tax due on the interest = £324.20

Dazed_and_C0nfused

jam1eg said:

Am I reading this wrong but this still states £33500

"Income tax on earned income is charged at three rates: the basic rate, the higher rate and the additional rate.  For 2017/18 these three rates are 20%, 40% and 45% respectively.  Tax is charged on taxable income at the basic rate up to the basic rate limit, set at £33,500. ‘Taxable income’ excludes personal allowances, which represent the amount of money someone may receive free of tax. Tax is charged at the higher rate on taxable income between the basic rate limit and the higher rate limit, set at £150,000. The additional rate is charged on taxable income over £150,000. All three tax rates are unchanged from 2016/17.
The personal allowance is increased by £500 to £11,500 for 2017/18. The basic rate limit is increased by £1,500, so that the higher rate threshold – the point at which individuals become liable to pay tax at the higher rate – is set at £45,000 for 2017/18."

This contradicts itself no? but the HM Gov website states about 33,500 is 40% to 150000

Have you read this page??

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2017-18/tax-and-tax-credit-rates-and-thresholds-for-2017-18#personal-tax-and-benefits

jam1eg

Yes I've read that page that is Annex A at the bottom of your original link.   Both these links seem to contradict each other - they don't help at all - makes my simple mind hurt!

So I guess the first question is was I a higher or lower rate tax payer?

Does this change the allowance?

So on the R40 form you claim 3.1 Net interest paid by banks      3.2 Tax taken off      3.3 Gross Amount

From what I'd read the refund should be the 3.2 tax incorrectly taken off at source by the banks as this was your personal allowance, I may have got it all wrong as I've had to research all this and when your not finance or tax based this isnt a pretty subject to go digging in but I feel my figures quoted on the form were correct and in the right places, that indeed was a hard part to do, took some time and digging to get correct.

So from your amounts above the tax shouldnt have been paid on the personal allowance part 1k but then taxed thereafter, so a refund of around £200 should be due? which is the 20% charged on the first 1k, the £1621 is taxable therefore the amount taxed of £324 is correct.

Dazed_and_C0nfused

so a refund of around £200 should be due?

Correct. 

Your Personal Allowance has been used against your earnings.

Assuming your tax was otherwise correct for that year then you would be due £200 less a very small amount most people on PAYE owe each year plus a small interest payment HMRC pay you if tax overpaid isn't refunded until after 31 January after the end of the tax year in question.

You don't "claim" anything on an R40, you simply enter the relevant details.

jam1eg

Thanks - I really do appreciate your help - you've helped no end

Yes I see what you're saying about the R40, you're stating facts not a claim.


Going back slightly, so HMRC have said there is nothing due and it's an even balance would this be because I'm a 40% tax payer and I've only paid 20% on the PPI payments and should have paid %40, therefore the extra needed to get the other 20% is the first 1k allowance therefore they've recouped £200 from there? if you see what I'm saying.

How do I get absolute clarity on these tax bands as to which I was on? lower or higher

Dazed_and_C0nfused

I genuinely don't know why you think you were a higher rate payer?

Does this help?

https://www.gov.uk/government/publications/income-tax-personal-allowance-and-basic-rate-limit-for-2017-to-2018/income-tax-personal-allowance-and-basic-rate-limit-for-2017-to-2018

jam1eg

I was told by HMRC that I was a higher rate tax payer so I went looking for why and found this link 
https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2017-18/tax-and-tax-credit-rates-and-thresholds-for-2017-18

From your link just above here it's saying

2016 to 2017	2017 to 2018
Personal allowance (PA)	11,000	11,500
Basic Rate Limit (BRL)	32,000	33,500
Higher Rate Threshold (HRT)	43,000	45,000

from what I've seen are these not the upper limits? so for examples
0 - 11500 is PA
11500 - 33500 is BRL
33500 - 45000 is HRT
45000 + is additional rate

To be quite honest, I just don't get this part, I don't understand this - the link is suggesting 33500 - 150000 is additional tax rate.

How can I find out 100% - would it be prudent to contact my payroll department and ask them a direct question around my allowances/tax rates?

me = confused.com

Dazed_and_C0nfused

0 - 11500 is PA
11500 - 33500 is BRL
33500 - 45000 is HRT
45000 + is additional rate

I really don't know how you have arrived at these figures. 

One minute you are saying the basic rate band is £33,500 but now it's just £22,000 🤔

How about this.  What do you get if you add £11,500 and £33,500?

What does your P60 show?