Since 6 April 2016, when the personal savings allowance was launched, you can earn up to £1,000 per year of tax-free savings interest. However, since that time, PPI tax has still had 20% deducted automatically.
Because PPI is taxed at the time it’s paid, if you’ve paid tax on PPI payouts since 2016, you may be entitled to a refund.
Download our Complete guide to reclaiming PPI Tax today!
The taxable element of your PPI refund payment was taxed at the base rate of 20%. Therefore, for every £1000 of statutory interest that you were refunded, you paid £200 in tax.
PPI refund payments were taxed in the year in which the refund was made. So, for example, if you took out a PPI policy in 2005 and you were refunded in 2018, those new PSA rules apply to you. However, if you received a pay-out before 5 April 2016, you won’t be able to claim the tax back.
If you paid no tax in the year that you received your PPI pay-out and the statutory interest payment did not put you into the taxable bracket, you are entitled to reclaim all of the tax that was deducted from the refund.
If you’re a taxpayer, as from 6 April 2016, you’re allowed to earn tax-free interest on your savings interest. You also get the income tax personal allowance for your particular earnings bracket.
Basic rate taxpayers
If your annual income is between £12,500 and £50,000, you’re classed as a basic rate taxpayer, and your earnings are taxed at a rate of 20%. However, your PSA entitles you to earn £1,000 in interest per year, tax-free.
Higher rate taxpayers
If your annual income is between £50,000 and £150,000, you’re classed as a higher rate taxpayer, and your earnings are taxed at a rate of 40%. Your PSA entitles you to earn £500 in interest per year, tax-free. Highest rate taxpayers If you earn over £150,000 per annum, you’ll be taxed at 45%, and you are not entitled to a Personal Savings Allowance.
If your payments were for agreements in joint names, then the other person may be able to submit a claim but must do so separately.
what do I need to complete my ppi tax refund?
Crystal have been trading for over 10 years and during that time, have successfully helped over 100,000 clients improve their financial well-being through various products and services – whether that is through the right financial products or providing expertise to help reclaim monies.
The Crystal Group of Companies trade as Crystal; Crystal Legal Services Ltd; Crystal Clear Financial Ltd; and Crystal Clear Law Ltd. Crystal Legal Services Ltd is regulated by the Financial Conduct Authority FRN837841 company number 6837474. Crystal Clear Law Ltd is Authorised and Regulated by the Solicitors Regulation Authority SRA number 655911 company number 11665654. Crystal registered office: Fairfield House, Back Lane, Spurstow, Tarporley, Cheshire, CW6 9TE.
1 Tax refund is dependent on how much you earned in the year of your PPI payout, your tax-payer status and the amount of interest paid in your win.
*Crystal Legal Services Ltd is a claims management company authorised and regulated by the Financial Conduct Authority. You do not need to use a claims management company to make your claim and could do it direclty with HMRC yourself for free.
**If successful, we will charge 30% plus VAT of any tax reclaimed