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PPI tax reclaim.

I have read loads of messages about this and nearly ready to make a claim but wanting to make sure partner is on 20% tax rate. The delay in claiming up until now has been busy with divorce and consent order.

PPI refund was £5671.99, including the 8% interest. Tax deducted was £638.10. Partner received a cheque for £5033.89 which was cashed 22nd January 2020.

For tax year 2019-2020 his total salary was £41882.26 with £5802.60 tax deducted and £3714.85 NI.

Would this qualify him for some tax back from the £638.10 already deducted bearing in mind he does not have any other interest paid on any other savings.

Comments

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,810 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 2 February 2022 at 5:56PM
    Firstly make sure you are using the correct figures.

    PPI refunds aren't taxable and do not have tax deducted so you would never need to tell HMRC about them.

    The statutory interest paid alongside the PPI refund is taxable and does have tax deducted.

    From what you have posted the relevant figures seem to be 
    Gross interest £3,190
    Tax deducted £638
    Net interest £2,552

    Salary is often irrelevant for tax purposes but if the £41,882 was taken from his P60 and is his only other taxable income in that tax year then he isn't near being a higher rate payer and the interest would be taxed as follows,
    £1,000 x 0% = £0
    £2,190 x 20% = £438
    Total tax due £438
    Tax already paid £638
    Tax overpaid £200

    He probably owes HMRC a pound of two due to how PAYE works so will get slightly less back although he should also be due a very small amount of interest (pennies) from HMRC as the tax is being refunded after 31:01:2021.

    NB.  The pay and tax you have quoted suggest he owes more like £75 but that may simply be because you haven't g all the details yet i.e. did his tax code include say job expenses??
  • Thank you for your reply Dazed.

    The breakdown letter says;
    The £3190 is the total untaxed 8% interest payment for all loans. 
    The £638 is the total tax deducted from 8% interest payment for all loans(there were 2).

    Your last paragraph makes me a little nervous. As far as I am aware he does not receive any job expenses but does receive an annual bonus paid in August, which was around £1500 net for that tax year. I'm assuming an adjustment is made for this in his tax code?

    Should he ask for the statement of Deduction of tax in relation to the 8% compensatory interest as noted in the letter he received  from the original loan company 'why tax has been deducted'?
  • Your last paragraph makes me a little nervous. As far as I am aware he does not receive any job expenses but does receive an annual bonus paid in August, which was around £1500 net for that tax year. I'm assuming an adjustment is made for this in his tax code?

    That wouldn't usually mean a tax code adjustment was needed.

    The best way to start checking the position is to see what tax code is on his P60.

    1250L is the tax code a lot of people would have had that year.  If it's different to that then you need to check what was added or deducted form his Personal Allowance to see what else needs factoring in.

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