PPI layout and statutory compensation interest

Traceyjs

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 😄

[Deleted User]

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

Moneyineptitude wrote: »

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.

Traceyjs

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]

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

The interest would need to be over £1000 before any additional tax is due which, I agree, is entirely possible.

[Deleted User]

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...

Traceyjs

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

Tell us what the amount of compensatory interest was. I don't think you have got it.

Traceyjs

The statutory compensation interest bit of the pay out was £1062

BoGoF

So £500 @ 0% + £562 @ 40% = £224.80.

Minus 20% already paid £212.40.

You owe £12.40