If you were awarded a pay-out for mis-sold PPI after 5 April 2016, you might be entitled to claim back the tax that was deducted from part of the payment that you were awarded.
In this guide, we explain more about how you can reclaim that overpaid tax, which could amount to a tidy windfall.
How do I claim my PPI tax back?
The easiest way to claim back the tax that was wrongly deducted from your PPI pay-out is to contact us through our online claims portal. HMRC does provide forms that you can complete, but the process of recovering overpaid tax is notoriously convoluted and complicated, and it’s all too easy to make a mistake that could cost you money in the long run.
Here at Crystal, we are very experienced in handling PPI tax reclaims, so it makes sense to let us manage your claim on your behalf. So, before you become embroiled in the hassle of complex form-filling, check out our online claims process!
In the meantime, here’s the official government steer on how to reclaim PPI tax.
Online forms R40 and R43
If you think that you’re entitled to reclaim the tax that was applied to your PPI refund payment, you can do so by completing one of the “Claim a refund of income tax deducted from savings” forms that you’ll find on the government’s website.
If you live in the UK, you need to complete form R40. If you’re an ex-pat, you should complete form R43. The quickest and most convenient way to fill in these forms is to do so online, although you can print the forms off, complete them manually, and post them to HMRC if you prefer.
Unfortunately, HMRC has made these forms a tad complicated, and that can be a struggle for you if you’re not used to dealing with tax-related issues, especially if your tax is paid by your employer via PAYE. Also, it’s not merely a case of entering a few basic personal details; there’s a whole raft of other information that’s demanded, which you might not have on hand.
So, to help you, here are a few guidelines on how to complete forms R40 and R43 if you do decide to undertake the process yourself.
- At the top of the postal form, remember to provide your name, address, and the tax year in which you received the PPI pay-out.
- If you have an accountant, enter their details in the box that asks for “your agent’s details.” If you don’t use an accountant, leave the box blank.
- When you enter your personal details in box 1, including your National Insurance number, double-check to make sure that they are correct. If you make a mistake, your reclaim application will be rejected, and you’ll have to start all over again.
- In box 2, you need to provide information about your income. That’s important as it tells HMRC what tax bracket you fall into and whether you were a non-taxpayer in the year for which you are claiming tax.
You can get that information from old P45 or P60s, or your employer during that year will be able to help you.
- In box 3, you enter the details of any interest that you earned on PPI and on your other savings.
- Box 3.1 is where you enter the tax that was deducted from the statutory interest part of the PPI pay-out that you received.
- Most people don’t need to complete boxes 4 to 10 but remember to check if they do apply to you.
- Finally, complete the repayment details in box 11, and remember to sign box 12.
If you received multiple PPI refunds in different years, you need to complete a separate R40 or R43 for each payment.
I’m a higher rate taxpayer. Do I need to do anything else?
If you are a higher rate or additional rate taxpayer or you’re close to the threshold for the next tax bracket, you must declare the statutory interest element of your PPI refund. However, if your pay-out was received during or post-2016, you were entitled to earn £500 tax-free. That means that you may still be able to reclaim tax, although any interest over and above that sum will be charged at 40%.
Also, if you were a basic rate taxpayer and your earnings during the year that you received your PPI refund were close to the next earnings threshold, the statutory interest figure might push you into the higher-rate tax bracket. That would reduce your Personal Savings Allowance from £1,000 to £500, meaning you should have paid 40% tax on any amount over and above that.
Unfortunately, the procedure for reclaiming overpaid PPI tax is not simple, and the forms that you need to complete can appear complicated to many people.
Although you can take on the task yourself, if you get it wrong, you could lose out. So, we recommend that you start the process to reclaim the money that you’re owed by contacting us via our online portal today. The secure, paper-free service takes just a couple of minutes to complete, it’s completely no win, no fee, and we could get you the refund you deserve in as little as six weeks. It’s a no-brainer!