Did you know that you can reclaim the tax on the interest of PPI payments you received? – Claim now, while you still can
Most individuals who claimed PPI are aware that the payment they received was not just a refund of the amount they had paid, but also interest on that refund. What most individuals were unaware of however, was that tax was deducted at source on that income.
In 2016/17, a savings allowance of £1,000 was introduced so that interest income up to this amount would be tax free. The savings allowance reduces for higher rate taxpayers to £500 and is not available for additional rate taxpayers. As a result, in most cases, individuals are due a refund of the tax deducted at source. Although, for some higher or additional rate taxpayers, they may have a tax liability on this income.
This can have particularly interesting application to spouses , where PPI payments were made on a joint account, and the income levels of each are different. It is therefore possible for one spouse to be in a liability position, one in a refund position.
In many cases the paperwork provided with the PPI cheque was sparce and therefore individuals were unable to see just how much interest was included. However, it has become apparent that in some cases the interest element of the payment was quite substantial. Due to the lack of paperwork provided to individuals claiming PPI refunds, HMRC have not to date pursued taxpayers for this. However, if you wish to claim a refund in relation to the tax overpaid, please note that you will need to do so by 5 April 2021 (in relation to the 2016/17 tax year) to ensure you are not out of time.
If you would like to discuss this further, please contact Gemma Hedges on 023 8046 1259.