PPI pay classed as savings?

Fishgal

Hi
i recently claimed the tax back on a PPI payout from 2016. I did this myself online with HMRC.  The rebate I got was much smaller than I imagined. The PPI payout was £8000+ and the rebate was £200. I am retired, my income was about £20,000 before the payout and HMRC added the £8000 on as “savings income” taking my invome right up there. Is this right? 

dunstonh

The PPI redress is made up of a return of premiums paid plus interest.   Only the interest element is taxed.  Not the return of premiums.   So, your interest was not £8000+     
It could be a coincidence but it looks like you may have told HMRC the wrong figures.  e.g. £8000 interest would see £7000 taxed at 20% and £1000 due a £200 refund.   The exact figure you mentioned.
If you have told HMRC the wrong figures then you should correct them if the interest was less than £1000.   Otherwise when HMRC find out the normal way (about 2 years later) they can charge you a penalty rate.

Dazed_and_C0nfused

Fishgal said:

Hi
i recently claimed the tax back on a PPI payout from 2016. I did this myself online with HMRC.  The rebate I got was much smaller than I imagined. The PPI payout was £8000+ and the rebate was £200. I am retired, my income was about £20,000 before the payout and HMRC added the £8000 on as “savings income” taking my invome right up there. Is this right? 

Assuming you mean the 2016:17 tax year then £200 is quite normal, it is the amount of tax saved by having £1,000 of your interest taxed at 0% rather than 20%.

You may well have completed the form incorrectly as PPI refunds aren't taxable and do not have tax deducted, it is just the statutory interest which is taxable.

But if the interest (before tax) was at least £1,000 it probably won't make any difference to the amount of tax due back.