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Is it worth trying to claim back tax on PPI claim

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Hello.  I am just after some advice on whether it is worth pursuing tax that may be owed on a couple of successful PPI claims from 2019.   The claims were made via the Fair Trade Practice and in total I received around £8k. I was recently contacted by them to ask if I was interested in claiming for the tax I would have paid, for which they would take 30% of any refund.  I declined, but it got me thinking would it be worth investigating myself via the Form R40 route?!
I've done some calculations and it looks like the net interest I received for the 2019/2020 tax year was around £3k (including £350 from ISA savings).  I only have the full tax breakdown for one claim, which shows that I paid £790 tax, but as the total interest I received is in excess of my annual tax free limit of £1k, I'm worried that if I make a claim for the £790, I may open myself up to having to pay tax on the remaining £2k......  Help!!!!

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  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,702 Forumite
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    edited 15 March 2022 at 8:23PM
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    You should ignore any interest from an ISA.

    You will need 4 figures in relation to the interest you have received.

    1.  The amount of normal (non ISA) interest from any bank or savings accounts.

    2.  The gross amount of the statutory interest paid alongside the PPI refund

    3.  The tax deducted from the statutory interest paid alongside the PPI refund (should be 20%)

    4.  The net amount of statutory interest I..e gross amount less the tax.

    I don't know why you think you might get £790 back.

    There is no tax free amount specifically for interest but a certain amount, often £1,000, is taxed at 0%.

    This could mean you get a refund of £200 but the interest from point 1 above will have an impact on this.

    Also, if you were a low earner you may be able to utilise the savings starter rate of tax where upto £5,000 of interest is taxed at 0% which would increase the amount of refund due.

    How much did you earn in 2018:19, the pay figure from your P60?

    NB.  All of the above assumes you weren't required to complete a Self Assessment return for 2018:19.
  • MalMonroe
    MalMonroe Posts: 5,783 Forumite
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    Hello.  I am just after some advice on whether it is worth pursuing tax that may be owed on a couple of successful PPI claims from 2019.   The claims were made via the Fair Trade Practice and in total I received around £8k. I was recently contacted by them to ask if I was interested in claiming for the tax I would have paid, for which they would take 30% of any refund.  I declined, but it got me thinking would it be worth investigating myself via the Form R40 route?!
    I've done some calculations and it looks like the net interest I received for the 2019/2020 tax year was around £3k (including £350 from ISA savings).  I only have the full tax breakdown for one claim, which shows that I paid £790 tax, but as the total interest I received is in excess of my annual tax free limit of £1k, I'm worried that if I make a claim for the £790, I may open myself up to having to pay tax on the remaining £2k......  Help!!!!
    If you are eligible to claim any tax back you can do that yourself and don't need to pay anybody any commission. What a cheek!

    Last year I received a cheque from HSBC - not connected to a PPI but a refund of some charges they'd made 10 years ago when they shouldn't have. Tax had been deducted before I received the cheque but because I do have a very low income (now retired) I  contacted HMRC for a return of the tax I'd paid. 

    I didn't complete a Form R40 because after I'd looked at it, it didn't seem to fit my situation.  

    I just wrote a letter outlining everything and sent it to HMRC. A few weeks later they refunded the tax in full. I could have left a message on my HMRC online account but it was easier for me to do a letter and they didn't seem to mind.

    You said "I'm worried that if I make a claim for the £790, I may open myself up to having to pay tax on the remaining £2k" - but if any tax is due on any amount you've been paid, HMRC will let you know at the end of one or other financial years. You won't be able to dodge it.
    Please note - taken from the Forum Rules and amended for my own personal use (with thanks) : It is up to you to investigate, check, double-check and check yet again before you make any decisions or take any action based on any information you glean from any of my posts. Although I do carry out careful research before posting and never intend to mislead or supply out-of-date or incorrect information, please do not rely 100% on what you are reading. Verify everything in order to protect yourself as you are responsible for any action you consequently take.
  • Freddie1984
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    Hi has anyone else been told they need to complete tax self assessment forms when trying to claim back tax on a PPI payment?
    Thanks 
  • Dazed_and_C0nfused
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    Don't believe so.

    Was your statutory interest more than ,£10,000?
  • FlowerGirl69
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    Thanks Dazed - I have most of the figures for part of the claim, but the second only lists Amount of Award, Interest (not net or gross) and tax paid.  Is it possible to get a full breakdown - if so, where from? My reasoning behind £790 is that was the amount of tax I apparently paid!  From what you are saying, I would be looking at 20% of that figure, at best, i.e. £158... Unfortunately I'm not a low earner (and earned £24k in 2019 tax year) and on PAYE so have not done a self assessment for that year.
  • Dazed_and_C0nfused
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    The interest and tax paid are probably enough to get to the end result.

    What are those amounts?

    With earnings of £24k the refund is going to be between £0 and £200, it will all depend on how much untaxed interest you received.
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