Ppi Refunds - Do You Have To Pay Tax On Them?

[bednobs]

as above

[emmie]

i didn't, got back 500 quid some years ago now, i complained to the bank and they sent me a cheque.

[Buenchico]

There's no tax on the refund itself.

However you also get a compensation payment, which is taxed at source. (i.e. tax has been deducted from it before it's sent to you).

If, like me, your income is below the personal tax allowance, you can then claim that tax back at the end of the tax year. (I made sure that I did!)

[LittleSquidge]

There is no tax due on the actual repayment.

You will also receive interest on this repayment and although Buenchico is right that this used to have tax deducted at source, this is no longer the case.

Any interest is now paid to you fully gross and depending on your tax rate band, you may need to file a tax return and pay the tax due.

If the interest falls into your personal allowance or basic rate band, you can received up to £1,000 of interest tax free. This covers £0 - £45,000.

If the interest falls into your higher rate band, you can receive up to £500 of interest tax free. This covers £45,001 to £150,000.

If your interest falls into the additional rate band, tax will be due on all interest received. This covers £150,001+.

Please remember that the allowance covers your total interest from all sources and you only get an allowance once per year.