Am I due a PPI Tax Rebate?

A PPI tax refund partly includes an interest payment at a rate of 8% of your PPI refund total. The interest element of your PPI refund is taxable (not your PPI refund) with 20% tax usually deducted automatically before you receive your refund.

The 20% tax deduction is passed on to HMRC because the interest from a PPI refund is classed as savings income and is paid to HMRC automatically to make sure they receive any tax due.

It is reported that most people don’t need to pay the tax on their PPI refund interest payments and if that’s the case you can claim the tax back from HMRC.

Our PPI tax rebate claim guide helps you find out your eligibility, how to submit your claim directly to HMRC and what evidence is necessary to make your claim successful.

Why can I claim a PPI Tax Rebate?

The PPI interest element of a PPI refund is seen by HMRC as savings income and tax is payable on savings income if the value of your savings is over the personal savings allowance.

If the value of your savings is below the personal savings allowance which is £1000 for most people tax is not payable. Higher rate taxpayers have a personal savings allowance of £500.

The fact that most taxpayers don’t receive interest from savings over £1000 is the reason why so many people are due tax back from their PPI refund payout.

If in the year(s) of a PPI refund payment you didn’t earn enough to pay any tax you are also eligible to make a claim where tax has been deducted.

How do I know if I have paid tax on my PPI refund?

The interest deduction should show on your PPI refund payout statement and if it doesn’t you can ask for a certificate from the organisation that paid you your PPI refund.

How do I claim a PPI Tax Rebate?

To claim your PPI tax rebate HMRC need you to complete an R40 form which is specifically for claiming back a tax refund from savings and investments.

You can complete the R40 online through your personal tax account or you can print the R40 off and post it to HMRC at the address on the form.

The R40 form can also be posted to you by calling HMRC on 0300 200 3300.

If you complete a self assessment tax return you won’t need the R40 form and should include your interest figures in the appropriate section of your tax return.

PPI Tax Rebate claim form R40

A separate R40 will need to be completed for each tax year of your claim and if you had a joint agreement both parties of the agreement will need to claim separately.

The PPI related figures you will need to complete the R40 will usually be shown on your PPI payout statement in a similar format to the below:

• Gross interest @ 8%.
• Tax taken off at 20%.
• Net interest.

The main boxes to complete on your R40 are:

Box 1 which needs you to include your personal details including your national insurance number.

Box 2 is for your income information which can be found on your past P60 or P45 statements.

Box 3 needs you to enter your PPI interest figure along with any other savings interest.

Box 3.2 requires the sum of tax taken off any PPI refund interest and any other savings.

Box 11 lets you enter the way in which you will would like any repayment of tax to be refunded to you and don’t forget to sign box 12.

PPI Tax Rebate claim evidence

Including the evidence that HMRC needs along with your R40 form is a vital part of the PPI tax rebate claim process.

If you don’t provide the right evidence HMRC will reject your R40 form until you give them the information they need.

HMRC ask that you provide them with a document that contains the following information about your PPI refund claim:

• The total interest received.
• The amount of tax deducted from the interest.
• The net interest amount.

This document is normally one of the following:

• The final response letter from the company that made the PPI payment to you.

When you submitted your PPI claim, you should have received a letter known as the final response letter.

This letter confirms the decision to compensate you and should include a detailed breakdown of the PPI payment you received.

• A certificate from the company that refunded you which confirms the tax deduction amount.

If you do not have the final response letter or if the breakdown was not provided, you can request a certificate from the financial institution that refunded your PPI payment.

This certificate will show the tax deducted from the refund which is what HMRC needs to see.

If you do not have either of these documents, you can request them from the company that provided the PPI refund.

To make this type of request it will be necessary for you to furnish your personal information, along with your PPI case reference number if available, as well as an approximate date of when you received the PPI compensation.

How far back can I claim a PPI Tax Rebate?

HMRC allow you to make a PPI tax rebate claim for the last four tax years. If you miss the four year deadline you will miss out on the tax rebate due from your PPI refund.

For a backdated PPI refund claim you will need to amend previous tax returns within the self assessment amendment deadlines.

PPI Tax Rebate and your Personal Savings Allowance

The personal savings allowance (PSA) is available to everyone who pays tax at the basic rate and higher rate tax bands.

It’s basically a sum of interest you can receive as income without having to pay tax on it. There is also a starter rate for savings allowance for people on lower incomes which has a value up to £5000 per tax year.

How much is a PPI Tax Rebate worth?

The tax deducted from a PPI refund is at a rate of 20% which means for every £100 of PPI refund interest received a £20 tax deduction is automatically charged.

The value of your overall PPI tax rebate will depend on the level of your total income and tax paid in each year of your claim.

If you didn’t earn enough to pay tax or your income from interest was within the personal savings allowance you should be entitled to a full refund of all of the tax you paid on your PPI refund.