Tax on PPI Payout

I recently have received a PPI compensation payment, and I am a bit confused, can someone please clarify for me
The payment was broken down into a number of elements, and the amounts are for illustration
Refund of PPI premiums Paid                                                  £1,000
Refund of Interest charged on the premiums paid                   £1,000
Statutory Compensation                                                          £5,000
Deduction from statutory compensation/income tax 20%       £1,000

The letter i received stated that the PPI company has deducted income tax of 20% from the Statutory Compensation amount.
When i read Martin's blog about reclaiming tax paid of PPI payouts, he mentions only should pay tax on Refund of Interest charged on the premiums paid.
For clarity, can someone confirm that the tax which has been deducted from the Statutory Compensation is correct in this instance? is this correct?

thanks for your help


  • Yes, it's correct. 

    You wouldn't pay it on the interest charged, as that's a sum that you previously paid and therefore not income.
  • garrardagarrarda Forumite
    33 Posts
    Part of the Furniture 10 Posts Combo Breaker
    thanks for your reply
  • LizHumLizHum Forumite
    1 Post
    First Post
    I've just received a letter from a company called FC Reporting Limited claiming they can claim tax back for me on a PPI payout I received a couple of years ago. It seems fishy to me. Their paperwork, some of which appears to have a HMRC header looks dodgy, like a poor photocopy and on low quality paper. The wording used is also weird, like they're trying to write in legalese but it's not quite right. I googled the firm and they come up as a very recently registered company (August 2019) but when I clicked a link to find out more the it took me via a sort of holding site connecting me to gbrbusiness before showing me their supposed company registration listing but it all seemed very dodgy to me. The forms they sent clearly request lots! of financial information. All the warnings about HMRC tax claim scams refer to phone and SMS approaches (possibly email) and say HMRC would only get in touch by post - I wonder if the scammers have picked up on this?  It seems very phishy to me. Have you come across them and/or could you advise me how to check if they are legit? 
  • This is the second stage of separating fools from their money.  Firstly, claims companies charge you to post your complaint form, then they charge to post your letter to HMRC.  

    If you think you shouldn't have paid tax on the interest, simply contact HMRC yourself.

    Or I can post it for you, for 25% plus VAT if you prefer.

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