Hmrc and claiming Interesr back

Hansop

I have filled in the hmrc forms asking for interest to be paid back from 2016 they have decided to add the amount of ppi I got back to my paye amount and are demanding I pay them 1600.00 as I haven't paid enough tax is this right???

[Deleted User]

Did you put the whole PPI refund on your R40 form or just the tax on the interest element of the refund?

If you tried to claim you were taxed on the whole lot, HMRC would assume you received a huge interest refund; or indeed if you did receive a huge interest refund; yes you probably do owe them money. The tax free element of interest isn't huge.

e.g. say you had a refund of £10,000 and £4000 of that was interest, you would have been taxed on the £4000. So you fill in R40 and declare £4000 of interest which is the bit you were taxed on. If you did the R40 and tried to claim tax on the £10,000, HMRC would have assumed you earned £10,000 of interest so assessed you and determined you owe them money.

The simplest way to sort this is to check your tax filings and do it correctly.