Tax due on PPI payment

whitesatin

I was fortunate to receive a PPI refund today, by cheque. Some tax has been deducted from the initial figure, maybe 3.5%. Should I expect to pay more tax than that? I’m a basic tax payer.

Dazed_and_confused

No, you don't pay 20% tax on the whole "settlement", you only pay tax on the statutory interest element.

But yes you do usually have to pay the claims company 20% of the whole "settlement".

So it could be say
PPI refund (including interest) £2,000
Statutory interest £3,750
Total settlement £5,750
Tax deducted £750 (20% of the £3,750)
Actual payout £5,000

You then have to pay the claims company £1,380. Being 20% plus VAT of the full £5,750. Unless your contract says you agreed to a lower figure,

Depending on your exact income tax position you may be entitled to between £0 and £200 of the £750 tax back from HMRC.

You may find some interesting comments appear regarding the cost of the stamp you used to make your claim

Bermonia

Have I missed something... OP doesn’t appear to have mentioned anything about a CMC.

Dazed_and_confused

They did originally. The first version of their post was about whether the claims company could charge a fee plus VAT on the gross settlement when the op only received the net of tax figure.

There was quite a bit more info originally which has now been removed.

whitesatin

Sorry, I’d only just received the cheque and was confused when I did the OP. I think I’m a bit clearer now, thanks, and grateful.