Ppi tax refund

Calvq

Looking for advice before I drop myself in it, got a 4K ppi refund, was looking to get a refund on the tax, but panicked as I work part time and just under personal allowance limit. If I put in the refund form will they add the 4K to my yearly earnings and tax me in my salary. I don’t have any savings in my name. Confused thanks

BoGoF

How much of the PPI refund was actually interest......that is how much will be treated as taxable income. But there is a also a 0% rate for savings income so you will likely get all thectax back.

fastbargins

Remember that if tax was deducted from the interest then you have already paid that tax. If you ask HMRC for that tax back, they will only give you what you are entitled to get back depending on your personal circumstances so you shouldn't worry about claiming it. If you're not entitled to it, they will tell you but you won't end up owing them more money.

Dazed_and_confused

You could actually end up owing extra tax if your income was high enough and some 40% tax was payable on it.

But if the op's only taxable income is the part time wages and interest element of the PPI payout then the interest would be taxed at the savings starter rate of tax. Which is 0%

So any tax deducted would be refunded.

but panicked as I work part time and just under personal allowance limit.

swanny65

Can i check the rebate my wife has just received from HMRC is correct.

She is a basic rate taxpayer, earning £23K. The PPI savings income for 2018/19 was £2601.00 and income tax of £520.34 was deducted.

I was expecting a full refund of £520.34. We have been sent £198.34 which is more or less 20% of the additional £1000 allowance given by HMRC.

Is the refund correct ?

Thanks

Nasqueron

You are taxed on the interest element of the refund


What did you declare to HMRC as the income - just the interest or the full refund?

swanny65

Form R40 asks for the net interest (£2080.66), the tax taken (£520.34) off and the gross amount (2601.00).

These are the figures i declared.

BoGoF

swanny65 wrote: »

Can i check the rebate my wife has just received from HMRC is correct.

She is a basic rate taxpayer, earning £23K. The PPI savings income for 2018/19 was £2601.00 and income tax of £520.34 was deducted.

I was expecting a full refund of £520.34. We have been sent £198.34 which is more or less 20% of the additional £1000 allowance given by HMRC.

Is the refund correct ?

Thanks

The refund us correct. Essentially the first £1000 is tax free (its actually a 0% rate) so only £1000 @ 20% is due back. The balance is taxed at 20%. What made you think it would all be repaid?

Dazed_and_confused

What made you think it would all be repaid?

Good question.

swanny65

Dazed_and_confused wrote: »

Good question.

Thanks you have confirmed the refund is correct. I thought (maybe) the £1000 interest allowance was for everyone without TIA PAYE income.

Dazed_and_confused

There is no £1,000 allowance.

It is a £1,000 tax band. Where £1,000 of taxable interest is taxed at 0%.

This only applies once you have used up your Personal Allowance and savings starter rate of tax (where up to £5,000 of taxable interest is taxed at 0%). Given your wife's earnings the savings starter rate isn't available so she just has the savings nil rate (aka Personal Savings Allowance) of £1,000 x 0%

Hence the c£200 refund.