NOW LIVE: The Forum 'Ask An Expert' event. The theme is ENERGY. Please post your questions on bills, switches, alternative fuels etc. Our expert MSE Andrew will answer as many as possible
PPI Refund Higher Rate Tax Liability
Freddykrueger69
Forumite Posts: 41
Forumite
in Cutting tax
Apologies for coming here but I am just off a call with HMRC where the total call length including waiting was over 90 mins.....
To strip it down myself and my wife received a PPI refund via Nationwide. I am a higher rate tax payer and my wife is basic rate. I called HMRC to find out what my liability would be and after all that time the replied saying "an extra 20%"
To give some facts and figures and very close to the figures, the PPI premium refund was fairly small but the claims date back from mid 90s so the compensation interest element amounts to circa £4000. From that they have deducted basic rate tax i.e. £800. Is it really the fact that of that interest  say my portion is £2000 and they have already paid £400 in basic rate tax that I need to pay an extra £400.
This is the conclusion that I got from them at the end and they said they would send out a simple tax calculation at end of tax year  no idea how/when this happens.
I just find them so frustrating to deal with
To strip it down myself and my wife received a PPI refund via Nationwide. I am a higher rate tax payer and my wife is basic rate. I called HMRC to find out what my liability would be and after all that time the replied saying "an extra 20%"
To give some facts and figures and very close to the figures, the PPI premium refund was fairly small but the claims date back from mid 90s so the compensation interest element amounts to circa £4000. From that they have deducted basic rate tax i.e. £800. Is it really the fact that of that interest  say my portion is £2000 and they have already paid £400 in basic rate tax that I need to pay an extra £400.
This is the conclusion that I got from them at the end and they said they would send out a simple tax calculation at end of tax year  no idea how/when this happens.
I just find them so frustrating to deal with
Outstanding mortgage Dec 2016 £214,500
Current mortgage outstanding May 2017 £211,244 June 2017 £210,446
Offset savings June 2017 £57,354 Balance outstanding May 2017 £154,490 June 2017 £153,091
Current mortgage outstanding May 2017 £211,244 June 2017 £210,446
Offset savings June 2017 £57,354 Balance outstanding May 2017 £154,490 June 2017 £153,091
0
Comments

Freddykrueger69 said:. Is it really the fact that of that interest  say my portion is £2000 and they have already paid £400 in basic rate tax that I need to pay an extra £400.
If you're a higher rate tax payer, yes, as you've paid insufficient tax.1 
MorningcoffeeIV said:Freddykrueger69 said:. Is it really the fact that of that interest  say my portion is £2000 and they have already paid £400 in basic rate tax that I need to pay an extra £400.
If you're a higher rate tax payer, yes, as you've paid insufficient tax.Outstanding mortgage Dec 2016 £214,500
Current mortgage outstanding May 2017 £211,244 June 2017 £210,446
Offset savings June 2017 £57,354 Balance outstanding May 2017 £154,490 June 2017 £153,0910 
@Freddykrueger69
It might be an extra £400 but equally it might not be that much. And in some niche circumstances it could actually be more than £400.
If you are already a higher rate payer and don't stray into HICBC or tapered Personal Allowance territory then the first £500 of interest is taxed at 0%. And anything above that will be taxed at 40%.
So it could easily be £400 (£2,000 x 40% less £400 deducted at source).
But it might only be £200 (£500 x 0% + £1,500 x 40% less £400 deducted at source).
How much other interest did you receive (or will you receive) in the tax year the PPI related interest was paid?
If it is the current tax year then you can expect the tax calculation in about 12 months time.
As a basic rate taxpayer your wife can potentially have the whole of her £2,000 taxed at 0%. It depends on how much of her basic rate band has been used from her non savings non dividend income.
And it's equally possible the £2,000 could push her into being a higher rate taxpayer.0 
Dazed_and_C0nfused said:@Freddykrueger69
It might be an extra £400 but equally it might not be that much. And in some niche circumstances it could actually be more than £400.
If you are already a higher rate payer and don't stray into HICBC or tapered Personal Allowance territory then the first £500 of interest is taxed at 0%. And anything above that will be taxed at 40%.
So it could easily be £400 (£2,000 x 40% less £400 deducted at source).
But it might only be £200 (£500 x 0% + £1,500 x 40% less £400 deducted at source).
How much other interest did you receive (or will you receive) in the tax year the PPI related interest was paid?
If it is the current tax year then you can expect the tax calculation in about 12 months time.
As a basic rate taxpayer your wife can potentially have the whole of her £2,000 taxed at 0%. It depends on how much of her basic rate band has been used from her non savings non dividend income.
And it's equally possible the £2,000 could push her into being a higher rate taxpayer.
The annual PSA is £1000 for basic rate and £500 for higher tax rate  I assume these cannot be rolled over for instance if you don't use in a particular year?Outstanding mortgage Dec 2016 £214,500
Current mortgage outstanding May 2017 £211,244 June 2017 £210,446
Offset savings June 2017 £57,354 Balance outstanding May 2017 £154,490 June 2017 £153,0910 
Freddykrueger69 said:Dazed_and_C0nfused said:@Freddykrueger69
It might be an extra £400 but equally it might not be that much. And in some niche circumstances it could actually be more than £400.
If you are already a higher rate payer and don't stray into HICBC or tapered Personal Allowance territory then the first £500 of interest is taxed at 0%. And anything above that will be taxed at 40%.
So it could easily be £400 (£2,000 x 40% less £400 deducted at source).
But it might only be £200 (£500 x 0% + £1,500 x 40% less £400 deducted at source).
How much other interest did you receive (or will you receive) in the tax year the PPI related interest was paid?
If it is the current tax year then you can expect the tax calculation in about 12 months time.
As a basic rate taxpayer your wife can potentially have the whole of her £2,000 taxed at 0%. It depends on how much of her basic rate band has been used from her non savings non dividend income.
And it's equally possible the £2,000 could push her into being a higher rate taxpayer.
The annual PSA is £1000 for basic rate and £500 for higher tax rate  I assume these cannot be rolled over for instance if you don't use in a particular year?
No, they cannot be rolled over.
Have you factored in any available savings starter rate for your wife?
If she isn't able to use that and has minimal non ISA interest then she could easily still be due the best part of £200 back.0 
Dazed_and_C0nfused said:Freddykrueger69 said:Dazed_and_C0nfused said:@Freddykrueger69
It might be an extra £400 but equally it might not be that much. And in some niche circumstances it could actually be more than £400.
If you are already a higher rate payer and don't stray into HICBC or tapered Personal Allowance territory then the first £500 of interest is taxed at 0%. And anything above that will be taxed at 40%.
So it could easily be £400 (£2,000 x 40% less £400 deducted at source).
But it might only be £200 (£500 x 0% + £1,500 x 40% less £400 deducted at source).
How much other interest did you receive (or will you receive) in the tax year the PPI related interest was paid?
If it is the current tax year then you can expect the tax calculation in about 12 months time.
As a basic rate taxpayer your wife can potentially have the whole of her £2,000 taxed at 0%. It depends on how much of her basic rate band has been used from her non savings non dividend income.
And it's equally possible the £2,000 could push her into being a higher rate taxpayer.
The annual PSA is £1000 for basic rate and £500 for higher tax rate  I assume these cannot be rolled over for instance if you don't use in a particular year?
No, they cannot be rolled over.
Have you factored in any available savings starter rate for your wife?
If she isn't able to use that and has minimal non ISA interest then she could easily still be due the best part of £200 back.Outstanding mortgage Dec 2016 £214,500
Current mortgage outstanding May 2017 £211,244 June 2017 £210,446
Offset savings June 2017 £57,354 Balance outstanding May 2017 £154,490 June 2017 £153,0910 
If her non savings non dividend income, which is often just PAYE earnings (including any company benefits) are going to be at least £18,570 then she's unlikely to be able to use the savings starter rate band.
Same for yourself.
If she is going to be a refund then yes an R40 is the correct form to complete next year. She includes all taxable income on this, including any normal non ISA interest.
I suspect you already realise this but you do not enter the PPI refund.0
Categories
 All Categories
 338.8K Banking & Borrowing
 248.6K Reduce Debt & Boost Income
 447.5K Spending & Discounts
 230.7K Work, Benefits & Business
 600.8K Mortgages, Homes & Bills
 171K Life & Family
 244K Travel & Transport
 1.5M Hobbies & Leisure
 15.9K Discuss & Feedback
 15.1K Coronavirus Support Boards