Reclaiming tax on PPI payout

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bubble_call
bubble_call Posts: 5 Forumite
in Reclaim bank & credit card charges
Hi There I recently got very excited when I saw Martin’s article about reclaiming the tax on your PPI payout.

I completed the R40 form as described and I’ve come home today to a letter from the HMRC saying that I now owe them over £3,400.00! I’m in shock and I’m not in a position financially to pay out that sort of money & I definitely didn’t expect that at all. I’ve made contact with them & they have basically said that as they did not have any previous knowledge of this it has taken me over & that I have to pay it.

Any advice please would be welcome as I wish I hadn’t filled in that form now

Many thanks

Comments

  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    You have completely misunderstood things.

    You cannot claim tax back on a PPI refund. Simply because no tax is deducted from PPI refunds.

    Tax is deducted from the interest paid alongside the PPI refund.

    Can you say which tax year this relates to?

    Roughly how much was your other taxable income in that tax year?

    Exactly what did you declare on the R40 for the "PPI"?
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    Dazed_and_confused wrote: »
    Exactly what did you declare on the R40 for the "PPI"?
    Sounds like the OP declared the whole PPI refund rather than just the interest...
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    Sounds like the OP declared the whole PPI refund rather than just the interest...

    Oh dear :o.

    Should be easy to fix though!
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    bubble_call wrote: »
    I completed the R40 form as described and I’ve come home today to a letter from the HMRC saying that I now owe them over £3,400.00! I’m in shock and I’m not in a position financially to pay out that sort of money & I definitely didn’t expect that at all. I’ve made contact with them & they have basically said that as they did not have any previous knowledge of this it has taken me over & that I have to pay it.
    You need to realise that you've completely cocked-up your R40 and HMRC now believe that they are due tax on your whole PPI refund rather just the interest element.

    You need to send them the correct information as quickly as possible.

    Do note that, if you are a tax payer, you probably won't be entitled to any refund at all.
  • bubble_call
    bubble_call Posts: 5 Forumite
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    Hi There

    It was for tax year 2018/2019

    My total taxable income is £45735.92

    I submitted the calculations provided by the PPI provider on the upheld claim being the following:
    Redress due with compensatory interest = £17,192.47
    Tax withheld = £2,071.32
    Total net payment of £15,121.15

    Yes I am a taxpayer

    Many thanks
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    Does the £45k include the £17k PPI you have declared or is if £45k plus £17k?

    And can you tell us why you declared £17k?
  • bubble_call
    bubble_call Posts: 5 Forumite
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    Hi There I went ahead and declared the final figures that were produced by the company. I'm a lot happier now as thanks to yourselves I've realised my mistake in declaring the whole PPI payout instead of the interest. I've spoken to the HMRC and spoke to a very lovely guy who totally understood what i had done. I'm just awaiting further information before I resubmit my R40 application. Please note that the online form is very confusing and it's better to download the word document which I will be doing and then sending in the relevant paperwork.

    Thanks again for all of your responses.
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    edited 25 November 2019 at 2:44PM
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    bubble_call wrote: »
    I'm just awaiting further information before I resubmit my R40 application.
    Are you certain that you are entitled to a tax refund at all?
    Is your total taxable income including the PPI interest below your tax free allowance?
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    Definitely not less than Personal Allowance (see post 6) but there may still be a refund due as some of the interest will be taxed at 0%.

    And even if no refund is going to be due it is in the op's best interests to ensure HMRC have the correct figures so they can issue an updated calculation to replace the one showing £3,400 additional tax is due.
  • [Deleted User]
    [Deleted User] Posts: 26,612 Forumite
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    Dazed_and_confused wrote: »
    even if no refund is going to be due it is in the op's best interests to ensure HMRC have the correct figures so they can issue an updated calculation to replace the one showing £3,400 additional tax is due.
    Yes, I totally agree the OP must correct the earlier errors (see post #5), but the expectation of receiving a substantial refund should be low.
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