Martin Lewis: Had a PPI payout? If so, you can reclaim the tax on it

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Comments

  • I am self employed , When you had a large ppi repayment are you to include that on your tax return?
    Thanks
  • Good afternoon, i am trying to complete my reclaim and have a question, as follows
    Some of the PPI tax paid was for joint payouts with my wife, and some individually, should I split the interest for the joint payouts 50/50 and complete a claim individually for myself and my wife?
    Thank you
  • Hi
    Just received a refund from PPI claim (Thanks Martin) and its been taxed in this year. Having read Martins write up for reclaiming, should I claim now or wait till end of this tax year when I have any other income returns (P60 etc). I can see there is a box to cross if part way through year but dont want to make it more difficult.
    Many thanks
  • Hi,

    Great Thread.
    I have been awarded a PPI sum. I am however very close to High rate tax. Adding the Interest figure to my salary would put me in the 40% tax bracket. At which point my Interest allowance gores down to £500. Is it worth me applying for my 20% back (~£420)?

    Cheers
  • I'm not sure you fully understand how interest and tax works.

    What exactly do you mean by this?
    Is it worth me applying for my 20% back (~£420)?
  • Hi,

    20% of the interest is ~£420.
    If I was a high rate tax payer I would need to declare the interest to the Tax man and subsequently pay Tax at 40% (not the statutory 20% already added), also reducing my Tax free interest earnings amount down to £500.
    Because I am already close to the high rate threshold, if I complete the R40, the addition of the total interest (£2k ish) in my PPI award to my salary income would put me in the high rate tax bracket. Therefore I would be liable for 40% tax on some and my tax free interest earnings would be reduced to £500.
  • There is no tax fee "allowance" for savings interest.

    Your £2,100 interest (plus any normal bank or building society interest received during the same tax year) would be taxed at a mix of the following rates,

    Savings nil rate (0%)
    Savings basic rate (20%)
    Savings higher rate (40%)

    How much goes in each tax band depends on what other taxable income income you have during the tax year.

    Best case scenario (assuming you have no other interest, which would be unusual for a MSE user!)

    £1,000 taxed at 0%
    £1,100 taxed at 20%
    Tax due £220

    Worst case sceanrio
    £500 taxed at 0%
    £1,600 taxed at 40%
    Tax due £640

    So you could be due a refund. Or you could have extra to pay, all depends on your other taxable income.
  • sheza
    sheza Posts: 20 Forumite
    I take it you can't submit a claim during the current tax year. I received a payout last month and there was £590 tax paid on it. The R40 claim online asks for a p60 but I won't get that until April. I don't get why there is an option to claim during the current tax year given the caims are retrospective.
  • Not everyone has a job or or pension paid under PAYE.

    For most people with a job the refund will be less than £200 so not life changing.
  • I received a large PPI payout from a cedit card company in May 2018. A sum of £1110.21 was deducted from the total sum before I received the monies (basic rate deduction on 8% interest). Having read Martin's piece about being able to claim back up to £1000 tax under the new savings allowance introduced in 2016 (which includes tax paid on PPI refunds) I applied to HMRC for this refund. They offered me £621. I queried this by letter and email but they are standing by what they said and when I spoke to one of their staff on the phone they said that Martin Lewis was wrong! I have no other income from the tax year in question and no other savings and receive a work pension where tax is deducted at source and a state pension. I am at a loss as to why Im not getting the full refund and would welcome some advice on this forum.I understand that I'm liable to pay tax at a basic rate on the sum of £110.21 as this is above the £1000 threshold. but cannot for the life of me see why Im not getting the full £1000 allowed tax free.
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