Do I need to pay tax on my PPI refund?
People who have successfully reclaimed a PPI refund will currently be required to pay tax on any additional interest paid as part of their PPI refund.
If you think you may be eligible to reclaim a PPI refund it is worth considering that you may have to pay tax on any additional interest paid to you as part of a PPI refund. It is important to know that HMRC have confirmed that there is no tax to be paid on the compensation sum received as part of a PPI reclaim, and only on any additional interest paid.
It is common for many PPI reclaim amounts to include interest and therefore if you have already received a PPI refund with interest, or you are looking to make a PPI refund claim that you consider that tax may have to be paid on the interest amount.
It has been quoted that the average PPI reclaim compensation sum is over £3000 which includes any interest which, if tax has not already been deducted from any interest could result in a significant amount of tax being due especially if it was unexpected.
Why do I have to pay tax on a PPI Refund?
As part of a PPI refund claim interest will be paid.
The interest paid as part of the PPI reclaim, is intended to reimburse the amount the money would have made as savings, had it not been spent on the PPI policy. In theory you would have paid tax had the amount been savings in any case, so you are not actually paying any more tax than you would have if the amount was in a savings account.
What should I do if I owe tax on my PPI Refund?
If you think you may have to pay tax on the interest from a PPI refund already received you should declare the amount to HMRC by contacting HMRC directly. If you have already paid tax on your PPI refund interest you do not need to take any further action.
What Do I Need?
Depending on the type of claim you are making sometimes more information will be required such as P45 or P60 forms but sometimes a claim can be made with your national insurance number alone.
It is still possible to make a claim even if you have not got all the forms and records that are normally needed but you will need further advice to make a claim successful.
What if I don’t pay tax and I have paid tax on my PPI Refund?
If you have not paid tax and you have paid tax on your PPI refund interest, you can reclaim the tax deducted from HMRC.
For further PPI information, please follow the links below:
Payment Protection Insurance (PPI) Facts, including:
– Are all PPI policies bad?
– Why were PPIs mis-sold?
– I had PPI on a loan 20 years ago. Can I still get a refund?
– Is there a deadline for claiming a PPI refund?
– How much will I get back?
– What if I have already claimed on my PPI?