If you successfully claimed a mis-sold PPI refund since 2016, there’s a good chance you’ll be entitled to reclaim the tax that you paid on the money that you received.
In this guide, we take a look at how much money you might be able to claim back from HMRC.
Why can I claim back PPI tax?
On 6 April 2016, the government launched the Personal Savings Allowance, which allows consumers to earn up to £1,000 interest every year on their savings, tax-free. However, due to rules introduced by HMRC, 20% tax has still been automatically deducted from all PPI statutory interest repayments.
So, as PPI is taxed at the time of payment, if you’ve received any PPI pay-outs since 2016, a tax refund might be due to you.
PPI tax refund calculation
So, how much PPI tax refund might you be entitled to?
Basically, the statutory interest element of the PPI compensation pay-out that you received was taxed at the base rate of 20%. So, for every £1000 refund of the statutory interest that you were paid, £200 was deducted in tax.
However, the amount of tax that consumers are entitled to reclaim varies on a number of things, and the form-filling that’s required to make a claim can be somewhat daunting.
For that reason, we recommend that you let us help you to navigate the minefield of all those complex forms. You can 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’re the refund you deserve in as little as six weeks. It’s a no-brainer!
Tax reclaim entitlement
Because the Personal Savings Allowance wasn’t introduced until 6 April 2016, any PPI refunds that were paid out before that date are not eligible for a tax refund.
However, even if you took out a PPI policy as far back as 1980, provided that you received the refund after 5 April 2016, you may be able to reclaim the tax that was automatically deducted on the statutory interest that you were awarded.
But I wasn’t a taxpayer. Can I still claim?
If you weren’t a taxpayer in the year that you received the PPI pay-out, unless the statutory interest payment that you received pushed you over the tax threshold, you are entitled to claim all of the tax back.
I’m a higher rate taxpayer, can I make a claim?
No, unfortunately, those earning in excess of £150,000 are not entitled to the Personal Savings Allowance. Therefore, you can’t claim the tax back that you paid on your statutory interest payment.
Also, if you were in the higher-rate tax bracket when you received your PPI refund pay-out, the tax rate you should have paid was 40%, which you should have done through self-assessment. If you didn’t do that, you must notify HMRC.
The clock is ticking!
Currently, you are only entitled to reclaim PPI tax four years retrospectively, including the current year. So, for the year 2020/21, you can’t go back any further than the 2016/2017 tax year. If you don’t act then there’s a chance you could lose any excess tax paid forever!
Don’t wait until next year!
Start our online reclaim process today to check if you can make a claim. Don’t run out of time to get the tax back that you are owed!
How much am I entitled to?
The amount of tax that you’re entitled to get back is dependent on a number of things, and working out the final figure is not straightforward. However, here’s a basic example to give you some idea of the amount you might receive:
Let’s take the case of a shop manager, earning £18,000 per year. The man’s earnings put him in the basic rate tax band, and he’ll pay 20% tax on his earnings.
In 2018, we secured a PPI refund pay-out for Mr. Example, which included a statutory interest element of £850. In addition, Mr. Example’s savings earned him £200 in interest.
Therefore, our shop manager’s total savings interest earnings for the year 2018 was £1,050, taking him over his Personal Savings Allowance by £50. So, Mr. Example should only have to pay a 20% tax on that £50. That means £10 tax, with the remainder being tax-free.
Because his PPI refund payment was deducted £170 at source, Mr. Example should receive a £160 tax refund.
The method of working out how much you might be entitled to receive in a PPI tax refund is complicated. For that reason, we recommend that you start our online claims process right now.
Remember the four-year retrospective deadline, and don’t delay. You could miss out on a useful windfall!