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PPI victims may be due £350m tax rebate

20-01-2020


People who received compensation related to payment protection insurance may be owed tax rebates, with these potentially totalling millions of pounds. Analysis shows that as savers have been able to claim £1,000 of savings interest every year tax free since 2016, most basic-rate taxpayers who received compensation since 2016 should not have paid tax. Based on the £13bn that has been paid out in compensation since the savings allowance was introduced – of which £1.75bn is thought to be interest - savers may be owed up to £350m in tax. However, higher-earning taxpayers who received PPI payouts may have to pay more tax as they should have been taxed at 40% or 45% on the interest element of their payout, while banks have usually deducted 20%. Richard Morley of BDO has urged HMRC to issue guidance, while RSM’s Jackie Hall comments: “Is this a tax bombshell waiting to happen? Potentially yes - but it works both ways." Mitch Young, founder of financial consulting group Fusion Consulting, said that the “vast majority” of clients do not realise that the PPI interest is taxable.

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