Sharing your windfall with the Taxman
4th December 2013
It’s almost like winning the lottery: you completed the form on-line, and suddenly your bank account swells with the returned premiums from policies you had forgotten you had taken out years ago. In fact, the average payment amounts to around £3,000.
But beware; the payment not only includes a capital sum based on the premiums paid, but also an amount of interest that would have accrued on the sum if the payments had not been made, and that interest is taxable.
To complicate things further, tax may or may not have already been paid before the compensation amount is paid out, depending on the type of company making the interest payment.
If you have received PPI Compensation and are not sure whether tax has already been paid on any interest included in the payment, you may want to contact the company who awarded the compensation in the first instance. You can find more information on the HMRC website www.hmrc.gov.uk.
