Reclaim tax paid on PPI interest payment

Bull1y

Hi all, I would appreciate any advice on the following situation.


Last year my wife and I made a successful mis-sold PPI claim from the Halifax. The claim was in relation to loans that we had taken out in joint names, which we were unaware contained PPI, dating back to the mid 90's.


August 2018 we received a letter from Halifax, addressed to both of us, with a detailed breakdown of the offer (which we subsequently accepted).


The breakdown included additional interest for the loss of money we used to pay for PPI. Gross interest calculated at the statutory rate.


The Gross interest element was £5,440


Halifax deducted income tax for the interest compensation element at 20%. (£1,088)


Therefore net interest paid was £4,352


I am a higher rate tax payer but my wife earns below the tax threshold.


How do we reconcile the tax owed or due back?



Can we declare the entire payment as being made to my wife only (it was paid into our joint account), with her unused income tax allowance + £1k allowance for earnings from interest, its likely we could claim the £1,088 payment back



Or
Do we have to consider the £5,440 as £2,720 each and each submit R40 forms into HMRC?


Cant find any reference online to clarify how we should treat this any advice most welcome

Nasqueron

You send R40


You only pay tax on the interest element


Basic rate tax payer can earn £1000 of interest from all sources (including savings) per tax year, higher rate, £500, top rate £0. Anything above that you pay tax on. If you received £5440 interest as a joint thing you'd probably need to speak to a tax specialist as a joint refund might not be that simple


Incidentally, I hope, all these years later, you now read what you sign up for. PPI isn't somehow added without your knowledge, it was on the loan paperwork you signed.

Dazed_and_confused

You are both taxed separately.

Based on your post you are likely to owe roughly an additional £345 in tax.

And your wife is unable to use the savings nil rate of tax (aka Personal Savings Allowance) but would be able to use the savings starter rate of tax where upto £5,000 of interest is taxed at 0%.

So she should be due a refund of all £544 tax she has paid.