Black Horse PPI Payout, Tax question.

jediknight49

I've received an offer today from Black Horse for PPI on 4 loans i had many many years ago (probably mid 90's)
The paperwork is around 8 pages long, but the final page mentions about the compensation interest and possible tax back from HMRC.
Seems bit of a minefield reading the jargon on the letter and looking online.
I am a basic tax payer, so my personal allowance this year is £12,500.
Total offer was around £3,800, of which gross interest was roughly £2,900, tax was approx £580. 
Not sure if there's a straight and simply answer, but can i claim back any tax on the compo interest? 
Thank you

Dazed_and_C0nfused

Probably an amount between £0 and £580.

The exact amount will depend on how much you earn (P60 pay figure) and how much other interest you receive in this tax year.

If you can provide an idea of those amounts then a more accurate refund amount can be provided.

jediknight49

Dazed_and_C0nfused said:

Probably an amount between £0 and £580.

The exact amount will depend on how much you earn (P60 pay figure) and how much other interest you receive in this tax year.

If you can provide an idea of those amounts then a more accurate refund amount can be provided.

Thanks for the response. My salary is approx 22k per year. 
Regards to other interest, I don't have any bank savings so no other monies or interest earned.

Dazed_and_C0nfused

It's likely to be about £200 then.

£1,000 of the interest will be taxed at 0% meaning the 20% tax deducted will be repayable.

jediknight49

Dazed_and_C0nfused said:

It's likely to be about £200 then.

£1,000 of the interest will be taxed at 0% meaning the 20% tax deducted will be repayable.

Ok thanks for the info.
I assume I'll have to fill out a HMRC form which I note Martin Lewis has spoke about previously? Quite a complex one I think he said 

Dazed_and_C0nfused

The R40 is a simple tax return.

You can look at it on gov.uk.

If you have your paperwork to hand you should be able to complete it in 5-10 minutes.

Just remember it is to declare taxable income.  PPI refunds aren't taxable income and don't have tax deducted.  The statutory interest paid alongside the PPI refund is taxable income and tax is deducted from this.

peteuk

Dazed_and_C0nfused said:

The R40 is a simple tax return.

You can look at it on gov.uk.

If you have your paperwork to hand you should be able to complete it in 5-10 minutes.

Just remember it is to declare taxable income.  PPI refunds aren't taxable income and don't have tax deducted.  The statutory interest paid alongside the PPI refund is taxable income and tax is deducted from this.

So if the refund is £100 and that made 8% interest per year, so £8.  The £100 is tax free and the £8 is taxable at the rate of X depending on your income that year.   This is going to be interesting as my wife didnt pay tax for a two year period before we claimed. 

Dazed_and_C0nfused

The statutory interest is all paid in one go and is taxable in the tax year it is paid.  

So if she received a single payment there is only one tax year is involved.

Most people can have total taxable income of at least £16,250, often £17,500 (in the 2019:20 and 2020:21 tax years) before any tax is actually payable on interest.