PPI Tax Refunds Explained
PPI Tax Refunds Explained
If you were mis-sold payment protection insurance (PPI) and made a claim against the firm that sold it to you, you could also be entitled to hundreds of pounds in tax refunds on the payout you received, which we can help you access.
Here, we explain everything you need to know about claiming tax back on PPI payouts, including why the tax is refundable, the requirements to be eligible, and how much you could receive when making a claim through us here at Complete Tax Reclaim.
What is a PPI Tax Refund?
A PPI tax refund provides you with a payout for the tax that you were charged on that top of statutory interest, which can be worth hundreds of pounds for large claims.
The PPI deadline for making a claim has now passed, but those who previously received a payout (and those waiting to hear if their claim has been successful) may be able to reclaim the tax that was deducted from the amount they received.
When you receive a PPI claim, it is typically split into three parts:
- A refund covering the amount you paid for PPI itself;
- A refund of any interest you were charged on additional loans set up by banks alongside your original loan;
- Statutory interest (8% a year, uncompounded) on the total of the points above
The most important figure when considering a PPI tax reclaim is the statutory interest, as this is the only element that is taxable. You should find this information on your payout statement, but if it’s missing, simply contact the firm that provided you with the PPI refund and ask for a certificate confirming the statutory interest.
Why do you pay tax on PPI refunds?
You were initially charged tax (at an automatic rate of 20%) on the statutory interest portion of your PPI refund because it is considered a form of savings interest for tax purposes (as if you had earned it on your saved cash). It counts as savings interest because its purpose is to return you to the position you would have been in if you had not taken out a PPI policy.
The good news is, however, that you can get this tax back through us here at Complete Tax Reclaim.
Why can you get tax back on your payout?
This automatic tax deduction has always been an issue for those who aren’t required to pay tax, but in April 2016, it became a problem for many more people.
On the 6th of April 2016, the ‘personal savings allowance’ was introduced, which meant that most taxpayers were able to earn up to £1,000 in interest tax-free per year.
Despite this initiative being launched, PPI claims continued to automatically deduct 20% tax from the statutory interest paid to claimants.
This means that many people who received their PPI payout after the 6th of April 2016 are now eligible to reclaim the tax that they were charged, which can – in some cases – be as much as several hundred pounds.
As tax can be reclaimed on payouts received up to four years ago, you must have received your refund on or after April 6th 2016 to be eligible.
How much tax can you claim back from your PPI payout?
Over £38.3 billion has been paid out in PPI claims so far in the UK, with the average successful PPI payout being £1,700 according to the Financial Conduct Authority (FCA), but how much tax can you reclaim on your payment?
The answer to that question differs from person to person, as it depends on your individual claim and how much it was worth.
Tax was automatically deducted from all PPI payouts at a rate of 20%, meaning that you paid £20 in tax for every £100 you earned in statutory interest.
You should, in theory, be able to reclaim that amount by making a claim through us here at Complete Tax Reclaim.
Things can be slightly different for those who are pay higher or additional-rate tax, so in order to determine whether or not it would be worth your while to make a claim, Reclaim your PPI tax today
If you received a PPI payout at some point after April 2016, hundreds of pounds could be waiting for you in tax.
How to claim tax back on a PPI refund
Many people find that the best way to reclaim tax on their PPI claim is to do so through a tax reclaim specialist such as ourselves, as we do all the hard work for you, allowing you to avoid trying to work through the complicated process yourself.
While you are able to make a HMRC PPI tax refund claim yourself by completing the R40 form (or R43 for those residing overseas), it is well-known that the process is long-winded, complicated and stressful for most people. You will need a vast amount of information and the form is written in a way that is difficult to understand, particularly if you aren’t very familiar with tax returns and usually pay tax through your employer’s regular payroll (PAYE).
You may therefore find it more convenient to reclaim the tax you paid on your PPI payment through a specialist tax reclaiming company such as ourselves.
Here at Complete Tax Reclaim, we do all of the paperwork for you and work on your behalf to retrieve the tax that was wrongfully deducted from your PPI claim.