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'Martin Lewis: Three must-dos by 5 April 1) Tax code rebate 2) Marriage tax allowance 3) PPI tax back'
'Martin Lewis: Three must-dos by 5 April 1) Tax code rebate 2) Marriage tax allowance 3) PPI tax back'
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I get the PPI tax angle but this forum isn't used very much so people might miss it
It's possible that you could be due a refund as £500 of any interest would be taxable at 0%.
But you may well owe some additional tax irrespective of this. Which you should really be advising HMRC of yourself.
Or would the tax % relate to the time PPI was overpaid rather than when it was paid back to me. In which case I would have been a 20% payer.
It is then down to individuals to sort their personal tax position, whether that be getting a refund or paying any extra tax due.
The interest is taxable in the tax year it was paid in, not spread over however many years it is paid in respect of.
The first £500 of any interest is taxed at 0% so the effective tax rate will be slightly less.
Let's say you have interest of £1,000
£500 x 0% = £0.00
£500 x 40% = £200.00
Total tax due = £200.00
Effective rate is 20%
Or interest of £3,000
£500 x 0% = £0.00
Total tax due = £1,000.00
Effective rate is 33.3%