Ppi tax refund

Fergy09

I applied for a tax refund but was told that as it's considered 'income' it's taxable. I was on the understanding that PPI reclaims should leave us in the same position as if we'd never paid the premiums, however that isn't entirely correct.

[Deleted User]

No. It's not entirely correct as it leaves you better off than if you hadn't paid them.

But the tax is still a requirement of that additional income you've benefited from.

[Deleted User]

Fergy09 wrote: »

I applied for a tax refund but was told that as it's considered 'income' it's taxable. I was on the understanding that PPI reclaims should leave us in the same position as if we'd never paid the premiums, however that isn't entirely correct.

It is correct.
The PPI refund does indeed put you back into the position you would have been in if you had never paid the PPI. The tax is only payable on the interest element (which you would not have been awarded if you had not paid the premiums). Do you know of any banking facility paying 8% interest?

Dazed_and_confused

I applied for a tax refund but was told that as it's considered 'income' it's taxable. I was on the understanding that PPI reclaims should leave us in the same position as if we'd never paid the premiums, however that isn't entirely correct.

The interest paid with the PPI refund is taxable income just the same as most other non ISA interest. What made you think it wasn't taxable, particularly when tax had been deducted?

But depending on your personal circumstances in the tax year the interest was paid you might be due a refund of some or all of the tax deducted. Or you could owe more tax.

Assuming you have no unused Personal Allowances the interest will be taxable at some (possibly two or three) of the following rates, 0%, 20%, 40% or 45%.

Without knowing more about your income in the year the interest was paid in its impossible to know what refund, if any, might be due.