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

Dazed_and_C0nfused

NX1977 said:

Dazed_and_C0nfused said:

NX1977 said:

Dazed_and_C0nfused said:

Why do you think you are due £1,036 🤔

As a basic rate payer with little other interest the most you would usually expect to receive is ~£195.

You get a £1,000 rate band where interest is taxed at 0%.  This saves you £200 in tax but yoy have to factor in any other interest (which won't have been taxed at source) and also that you normally owe a small amount under PAYE and that is factored in to any calculation HMRC do (otherwise it's usually ignored).

You are also overcomplicating things referring to the PPI refunds.  These are not taxable and did not have tax deducted, it's just the statutory interest that is relevant.

Which is presumably £5,180???

What does you calculation show income wise (the breakdown of each source)???

Hi 

But tax was deducted on each payment where it shouldn't have been. 

My understanding is the PSA was £17,500 before tax was due 

No idea where you have got that from!

If your taxable earnings or pension income was £17,500 or more in 2019-20 then the first £1,000 of any interest would be taxed at 0% (the savings nil rate aka Personal Savings Allowance).

Anything above that would be taxed at 20% (the same amount as the PPI company deducted).

If your taxable earnings or pension income was less than £17,500 you could have some of the savings starter rate band available (another 0% tax band).

But I suspect your earnings/pension income was more than that so you just benefit from the £1,000 where interest is taxed at 0%.

Was ML show on reclaiming the tax. 

I'll rewatch this afternoon. Happy to stand corrected if wrong but sure Martin said it's earning £1k in interest, not having £1k in savings. 

It is £1,000 in interest, not savings.

For a basic rate payer, without the savings nil rate band (PSA) that £1,000 would be taxed at 20% giving a tax liability of £200

With the savings nil rate band that £1,000 is taxed at 0% giving a tax liability of £0.

Tax saving is £200.

In your case there is likely to be a couple things which mean the £200 is reduced slightly, other (untaxed) interest and owing a small amount of tax* being the likely reasons.

*which had previously been ignored