Questions & Answers
Q: Why was tax taken on my PPI Compensation Claim?
A: Interest is added from the date you paid PPI premiums until the time of your claim, this is to ensure that the real value of your money has not diminished. Interest is typically added at 8% per-anum (though older claims it’s 15%) and this is taxed at source before you receive it.
Q: How much tax will have been taken?
A: This depends on the premiums you paid into PPI and the number of years since you had the plan, as interest is added for each year you last had the plan until the date of the claim.
Q: Why are we able to reclaim tax?
A: Since 2016 each person has a Personal Savings Allowance. This means that they can earn an amount in interest before tax is taken. For basic rate taxpayers this is £1,000 and for higher rate taxpayers this is £500.
Q: How much tax can be reclaimed?
A: This depends on the amount of interest within the claim and your total earnings in that tax year. For example, if the interest from the award is added to your total income for the year, and this is less than £18,500, all of the tax taken from your PPI or Pay Day Loan can be reclaimed.
Q: What if the claim was in joint names?
A: As each person has a personal allowance, a joint claim for a basic rate taxpayer could see £2,000 allowance being used (£1,000 each), and £1,000 allowance could be made for higher rate taxpayers (£500 each).
If you did not pay tax, or for example, or had a total taxable income of less than £18,500 in tax year 2019/20, all of the tax taken would be returned.
Q: What if PPI compensation was paid out in different tax years?
A: As the allowance applies each year, if PPI claims are made in different tax years, you will be able to claim back tax for each tax year compensation payments were made.
Q: What if I already have interest from bank or building society accounts?
A: A basic rate taxpayer is able to earn £1,000 in interest before they are taxed. With interest rates being so low, this means that a significant sum would have to held o deposit to generate £1,000 interest. For example if your savings rate is 1% you would need to hold £100,000 on deposit to generate £1,000 in interest.
Q: How many PPI compensation claimants are due a tax rebate?
A: The vast majority of PPI claimants we help have not utilised their savings allowance and we are able to help them receive a rebate.