Why have I paid tax on my PPI pay-out?
PPI pay-outs are comprised of the pay (which is the discount of the PPI premiums paid and the interest you have paid on those premiums) and the statutory interest on the compensation, at 8% (paid in acknowledgment that you were deprived of your cash for quite a while).
It is just the second component, the statutory interest, which is taxable(in the tax year that you get it). Your conditions in the duty year(s) in which you paid the first premiums are not significant.
Despite the fact that the statutory interest element is treated for charge purposes as savings income, it isn’t paid gross like bank interest/premium. More often than not, fundamental rate charge is deducted at source on the interest element of a PPI pay-out before it is paid to you. The tax is then passed to HMRC for your sake.
In any case, you may not conclusively be subject to pay charge on the PPI interest element, for instance, if when joined with your different savings income for the year, the all out is inside your Personal Savings Allowance, or if your all out taxable income for the year is inside your tax-free personal allowance – £12,500 in 2020/21. If so, it is conceivable to claim back the tax which has been deducted at source.
How would I claim back the tax on my PPI pay-out?
You can make a claim for a tax repayment on your PPI interest on the web or through government sites.
You may have had different expenses deducted from the pay-out, so you ought to guarantee that the sum you are attempting to reclaim is only the tax element.
You additionally need to remember for the structure whatever other available salaries that you got in the expense year – including the state pension.
How far back can I claim?
You ordinarily have four years from the finish of the tax year in which the excessive tax emerged to claim a refund. Along these lines, on the off chance that you got your PPI refund in 2020/21, you have until 5 April 2025 to present a case. In the event that the excessive tax emerged in 2016/17, you have until 5 April 2021 to place in your claim, etc.