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PPI compensation & tax/benefits

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I am on ESA (support group), from April I will receive £130.65 pw, I just received compensation from Barclays bank for PPI relating to the years 1997 to 1999, they sent me a cheque for £927.13, I then had to pay the third party company who handled it a fee of £254.41, Barclays bank deducted income tax of £132.92 automatically before sending me the cheque, seeing as I do not pay income tax due to being on benefits am I entitled to claim back the £132.92 from HMRC or should I just leave it?

Replies

  • zx81zx81 Forumite
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    If you're below the threshold, you can reclaim it.  The interest part of the redress is treated as income, so you may need to declare that in case it impacts your benefits.
  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    I am on ESA (support group), from April I will receive £130.65 pw, I just received compensation from Barclays bank for PPI relating to the years 1997 to 1999, they sent me a cheque for £927.13, I then had to pay the third party company who handled it a fee of £254.41, Barclays bank deducted income tax of £132.92 automatically before sending me the cheque, seeing as I do not pay income tax due to being on benefits am I entitled to claim back the £132.92 from HMRC or should I just leave it?

    Based on your post you would be due all of the £132.92 tax back from HMRC.

    You will need to wait until April and then complete form R40 (on gov.uk).  This is a simple tax return so if your ESA is taxable then you need to declare that alongside the statutory interest/compensation paid alongside the PPI refund.

    The PPI refund itself is not taxable and should not be mentioned on the R40 form.
  • spaniel-loverspaniel-lover Forumite
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    Thank you.
  • spaniel-loverspaniel-lover Forumite
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    Fifth Anniversary 10 Posts Combo Breaker
    zx81 said:
    If you're below the threshold, you can reclaim it.  The interest part of the redress is treated as income, so you may need to declare that in case it impacts your benefits.
    That amounts to £165.06 according to the breakdown from Barclays, so getting back £132 from the HMRC in order to give £165 to the DWP is not economical.
  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    You can't choose not to notify DWP.

    And by interest I think the reference was to the taxable interest, which would be £664.60 if the tax deducted was £132.92.
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