Are You Eligible for a PPI Tax Refund?
If you received a payment for mis-sold payment protection after April 2016, you could be due a refund, find out more below to see if you are entitled to money back with a Tax refund.
Tax Reclaim PPI is made up of a team of professional Tax Agents and Advisors with years of experience in claiming back PPI Tax. Our mission is to help you reclaim the maximum Tax PPI you are entitled to, with minimal fuss, ensuring a smooth and easy process for you. We strive to provide quality service and ensure all our clients are well looked after. Our main goal is to provide the absolute best service from the collective experience of our team of Tax Experts.
The PPI Scandal
Payment Protection Insurance covered repayments in circumstances where individuals couldn’t cover payments themselves. This could have been due to a number of reasons such as; being made redundant, accidents or health problems which resulted in individuals being unable to work as well as, illness, disability or death.
Among the 64 million PPI policies which were sold in the UK, the majority were in fact, mis-sold with complaints starting from the early 2000’s. This scandal received a huge projection in 2005 with the Citizens Advice issuing a ‘Super Complaint’ and this soon began a series of events that led to compensation payments for consumers. This complaint also made it possible for a huge number of some types of PPI to be banned.
By August 2019, banks, building societies and other types of credit providers had paid out over £36billion in compensation to those who had been involved in the PPI scandal. With the average payout being £2000, consumers were rightfully able to claim back the huge amounts that they were owed.
PPI Pay-Out’s, Interest and Owed Tax
Most savings interest has been paid without any tax being taken, but PPI still has 20 per cent automatically deducted.’ Martin Lewis (Cashback King)
Most firms would have automatically deducted tax at the basic 20% rate on PPI payouts even though not everyone would have had to pay. Non-taxpayers have the right to claim back all of the tax they paid from HMRC.
At the start of the Tax year in 2016, the personal savings allowance was introduced. This allows taxpayers to earn £1,000 a year tax-free interest on their savings – including statutory interest on PPI claims. As PPI is taxed at the point it is paid in a lump sum, most of those who have paid tax on PPI pay-outs since, are entitled to money back.
‘The reason you’re taxed is that the statutory interest is paid to try and return you to the position you would have been in if you hadn’t been mis-sold PPI.’ Martin said.
Tax Reclaim on Pay-Outs After 6th April 2016
If you were a non-taxpayer in the year the PPI was paid out, unless statutory interest pushes you over the tax-paying threshold, you can claim all of the tax back that you were taxed at the time.
Since April 6th 2016, the personal savings allowance is a further specific amount most taxpayers are allowed to earn tax-free just on savings interest:
Basic 20% rate taxpayers (earning £12,500-£50,000) can earn £1,000 in interest a year tax-free. Higher 40% rate taxpayers (earning £50,000-£150,000) can earn £500 in interest a year tax-free. Top 45% rate taxpayers (earning over £150,000) don’t get a personal savings allowance.
This is as well as the normal income-tax personal allowance.
Consumers would be due all PPI tax paid back if the total interest is less than the personal savings allowance. Claims can be made up to four years back as well as the current tax year.
Claims for PPI Payments Received Before April 2016
There is nothing to claim back for basic-rate taxpayers who should have been paying the normal 20% tax as this was what was automatically deducted. However, those earning just enough to pay tax (starting savings) or non-taxpayers should be able to reclaim some or all the tax. This is just like other usual savings income.