PPI and Tax Credit question

Aelic · 31 October 2019 at 11:33AM

Hello everyone

I wonder if somebody could perhaps guide me in the right direction on this issue. I have tried calling HMRC but after talking to 3 people, I have received conflicting advice and so am more confused than ever!

I am a single parent working part time and earning around £12k. I receive working tax credit and child tax credit at around £110 per week. This is made up of around 65% child tax credit and 35% working tax credit. I have a mortgage.

I recently filled in an application with Lloyds 'just to see' if I had ever had PPI on any loans or on my mortgage and was astounded to receive a letter telling me I was due a refund of £1300 for my mortgage and £10,600 on various loans I had taken out over previous years!!

So this is where it gets confusing.....
I am aware I need to 'declare' this to HMRC but I'm not sure how much?

I understand that the PPI refund is NOT classed as income but interest accrued is?
However, on the larger amount in particular, the 'compensatory interest' amounts to over 60% of the actual payout!

So my question is, do I have to declare all compensatory interest amounts? Or do I only have to declare 8% interest of the total sum?

Also, should I be claiming tax back? And if I do, is that going to make the amount I declare even more conrfusing?

Hoping for any advice as I really don't want to mess things up.
Also slightly worried that my 'unexpected windfall' which I was already mentally spending on essential property maintenance that I haven't been able to afford previously, is now going to leave me with no tax credit income for the next 12 months.

Any help would be massively appreciated.

Thank you in advance

SonOf · 31 October 2019 at 11:37AM

I am aware I need to 'declare' this to HMRC but I'm not sure how much?

only the interest element is taxed. Not the capital part (i.e. the refund of premiums).

However, on the larger amount in particular, the 'compensatory interest' amounts to over 60% of the actual payout!

That is quite normal on older cases.

So my question is, do I have to declare all compensatory interest amounts? Or do I only have to declare 8% interest of the total sum?

You tell them of any interest you have received and the tax paid at source.

Also, should I be claiming tax back? And if I do, is that going to make the amount I declare even more conrfusing?

There is nothing you need to do that is confusing. You just thell them the interest received and the tax paid on it and let HMRC do the rest.

SwansPoet · 31 October 2019 at 2:10PM

I need to POST the form R40 to clam a ppi income tax refund but cannot find the relevant address - can anyone help?

Okydoky25 · 15 November 2019 at 1:09PM

You can complete the R40 directly online. I did find it tricky to find the actual section for the PPI Tax calculations.

PPI and Tax Credit question

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