self assessment of endowment misselling payment

Pwit_2

During 2006/7 Tax year I received a payment for the misselling of an endowment mortgage policy. The company have sent me a 'certificate of deduction of income tax on interest paid' in respect of 'Settlement interest'. As I am still paying into the policy, what is this 'settlement'? I have tried phoning them but don't understand their explanation and they have not sent any further written explanation.
Has anyone else who has received a payment for misselling also received an income tax deduction certificate and, if so, whereabouts does it go on my tax return form?

jimmo

I took out my endowment mortgage the week before the protection laws came into place, ouch. So I have no personal experience.
It sounds as if you became entitled to the compensation on a specific date, possibly the date of your original claim.
The compensation you received will then consist of the amount of the compensation you were entitled to plus interest from the date of your entitlement to the actual date of payment.
When you complete your tax return ignore the compensation element but the interest and tax deducted have to be declared in exactly the same way as bank interest.

dunstonh

The redress method can (and often does) include part of the redress as an interest payment. This has tax deducted at source as a normal savings account. If you are a nil rate taxpayer you can claim it back via your tax return. If you are a higher rate taxpayer you pay the extra via your tax return.

Treat it as a bank account interest payment.

Debt_Free_Chick

Just to clarify ... there is no tax to pay on the compensation/redress (settlement). There is only tax to pay if interest was added onto the settlement.

Some tax was deducted from the interest when it was paid - this is why you have the certificate.

Whether you have any more tax to pay depends on your situation, as dunstonh has explained.

Again - as dunstonh says - treat the settment interest in the same way as bank interest.

HTH