PPI compensation recipients urged to check tax
HM Revenue & Customs (HMRC) has recently reported that many thousands of people will have to pay tax on the interest that they received on top of their Payment Protection Insurance (PPI) compensation. However, whilst much of the news has highlighted the need for forthcoming claimants to check whether tax has been made at source, it is important for those lucky enough to have already received their entitlements to ensure that they have not failed to pay enough tax.
The missold PPI scandal has rocked the financial world, and has cost the banks billions of pounds because they have had to set aside compensation to repay customers who were wrongly sold insurance. PPI was designed to offer financial aid to people who lost their jobs or became ill and therefore could not meet the payments for their credit agreements. However, in thousands of cases, the insurance was missold, resulting in a tribunal ruling last year that banks had to repay customers their premiums with added compensation.
Any interest made on repaid premiums is taxable under current HMRC laws, and therefore claimants made need to organise tax payments themselves if money has not already been subtracted at source. Whilst experts call for HMRC to change the law so that they do not profit from the scandal, tax will still need to be paid. For those already enjoying the average £3,000 payout, it will be important to check that tax fraud has not accidently been committed.