is PPI payouts classed as earnings?

Cookiepops

Just come off the phone from the tax office and Im really confused.

I contacted them back in April because I believe I had overpaid on tax. The annual bonus we receive at my company (same amount for all), I walked away with less than half. It was the same amount as the previous year so I know what I should have roughly taken home as no other circumstances had changed. Anyway phone call to tax office confirmed the same and I was told to expect a cheque for £860 in around 8 weeks.

Not received anything so I called them and now being told I have underpaid tax by £15!! The chap was very apologetic so no point in ranting at him. From him looking through my account he said he thought it was due to a PPI payout I received in April 18, that 20% basic taxpayer is applied to the interest but actually it sent me into the 40% tax bracket of earnings for the year so now I have underpaid on my tax for the year.

I know I did get a PPI payout do can't really complain but I've had the expectation of an £860 cheque just taken away from me and I thought I was all paid on the tax for the year

[Deleted User]

Can I refer you to your similar thread from yesterday?
https://forums.moneysavingexpert.com/discussion/comment/76059464#Comment_76059464

All your tax allowances for the year are listed there in a post by "Dazed and Confused".

It sounds to me like you've incorrectly filled in the R40 form...

Dazed_and_confused

is PPI payouts classed as earnings?

No.

But the interest paid alongside the PPI refund is taxable income.

If your tax code was correct and being used on a culative basis there is no reason the tax on an annual bonus would be wrong.

Did you notify HMRC about the PPI/interest and if so what exactly did you tell them?

It is clear from a number of posts on the article Martin Lewis wrote about tax on PPI interest that some people are telling HMRC about non taxable PPI payments rather than just the taxable interest element.

Cookiepops

Hi, I told them only of the interest and the amount I was taxed at on that interest (not the entire PPI payment). The letter I received on the PPI payout was very clear and well laid out. It explained what the full payout amount was, how they calculated it, which of the amount was the statutory interest and tax (based on 20% standard income). That was the information I used in the R40.


Im hoping that when they do send me something, they will explain how they calculated because I cannot work out how on earth I would have to pay nearly £900 in tax. Even if it did send me over into the 40% tax bracket, it would be only just and I only pay 40% on the amount over the threshold.

BoGoF

We need all your fugures if you want an explanation.

However if you are into the 40% tax bracket then your nil rate savings amount drops to £500.