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PPI layout and statutory compensation interest

Hi

I have been fortunate enough to receive a PPI payment and my calculation provided by Barclays states that 20% had been deducted for statutory compensation interest fir income tax. Thanks to Martin Lewis site I see that if my savings and PPI statutory interest is less than my personal savings allowance then I can reclaim the PPI tax on a R40 form(?). My question is if I am a higher rate tax payer ( pay 40%) should I have paid 40% from the statutory compensation interest for income tax instead of 20% .. in other words do I owe The tax man or does he owe me?

Thanks for any advice .. I don’t really understand tax very well and was recently stung with child benefits and want to make sure I do the right thing

Cheers 😄
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Comments

  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    Traceyjs wrote: »
    I see that if my savings and PPI statutory interest is less than my personal savings allowance then I can reclaim the PPI tax on a R40 form(?). My question is if I am a higher rate tax payer ( pay 40%) should I have paid 40% from the statutory compensation interest for income tax instead of 20%
    Yes, you owe more tax which, of course, you should now declare to HMRC.
  • BoGoF
    BoGoF Posts: 7,098 Forumite
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    Yes, you owe more tax which, of course, you should now declare to HMRC.

    A little more complicated than that. Higher rate taxpayers are entitled to a £500 nil rate savings allowance. So dependant on amount received as to refundor owing.
  • That’s what I thought. So should I work out the payment I owe at the higher 40% tax rate and then if less than £500 I am owed and if more than £500 then I owe HMRC ?
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    BoGoF wrote: »
    A little more complicated than that. Higher rate taxpayers are entitled to a £500 nil rate savings allowance. So dependant on amount received as to refundor owing.
    Fair enough, but the OP has only currently been taxed at 20% so that £500 allowance could easily be swallowed.

    So I should have said that a refund is unlikely and that additional tax may still be owing.
  • BoGoF
    BoGoF Posts: 7,098 Forumite
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    The interest would need to be over £1000 before any additional tax is due which, I agree, is entirely possible.
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    Traceyjs wrote: »
    So should I work out the payment I owe at the higher 40% tax rate and then if less than £500 I am owed and if more than £500 then I owe HMRC ?
    As someone else said, it a little more complicated than that! :)

    Your £500 tax free allowance is based on the whole interest refund, not just the additional 20% tax you have to pay...
  • Ok think I get it! So in my case a deduction from statutory compensation interest for income tax at 40% works out at £424 so presumably I don’t have to pay tax as it’s still under my £500 allowance ... or am I missing something?
  • BoGoF
    BoGoF Posts: 7,098 Forumite
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    Tell us what the amount of compensatory interest was. I don't think you have got it.
  • The statutory compensation interest bit of the pay out was £1062
  • BoGoF
    BoGoF Posts: 7,098 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    So £500 @ 0% + £562 @ 40% = £224.80.

    Minus 20% already paid £212.40.

    You owe £12.40
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