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Unclaimed PPI Tax Refunds: How to Retrieve Your Money from HMRC

Author: Samuel Beckingham
Updated: Jul 24, 2023
6 minutes read
  • How to claim an HMRC PPI tax refund
  • The deadline is 5th April 2024
  • Why tax was taken

If you received a PPI payout in 2019, now is the time to claim back any tax that you may have paid on it. Until April 2024, you have the opportunity to receive an HMRC PPI tax refund. This is because at the time you had your payout, you may have had tax deducted from the total.

This article will explain why tax may have been deducted from your payout. It will also look at why you might be able to claim an HMRC PPI tax refund and how much you could potentially receive. The deadline is approaching, so don’t miss out on your money.

HMRC plaque outside their London office

What Is a PPI Tax Refund from HMRC?

PPI payouts may have had tax deducted from the interest you received. Thanks to the personal savings allowance, you can earn a certain amount of interest tax-free every year. If you were taxed on your PPI settlement, this may have been done unfairly. Providing you didn’t make use of your full personal savings allowance, you should be able to claim an HMRC PPI tax refund. This will give you a refund of the PPI element that was taken as tax.

Why Was Tax Deducted from PPI Payments?

The majority of a PPI settlement is compensation. The rest is made up of 8% statutory interest, which is worked out on that compensation. If you didn’t receive your money for some time, this 8% can build to a healthy amount. Before you receive your money back, the taxed interest is handed to HMRC. It’s treated as savings income, which is why tax is taken from it. An HMRC PPI tax refund gives you this back.

How Can I Tell If Tax Was Deducted from My PPI Settlement?

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The easiest way to see if you’re eligible for an HMRC PPI tax refund is to look at your settlement paperwork. It should detail how much you received in compensation and how much was deducted in tax. From there, you simply need to work out the net and gross interest. Without these details on your paperwork, it’s impossible to know for sure how much tax was taken.

If you don’t have your paperwork, you can try asking the bank that paid you for this information. In some instances, you might have to submit a Subject Access Request (SAR), which legally obliges them to provide it. Any personal data that they hold needs to be given to you. Without knowing the interest, it’s difficult to see how much you could receive from an HMRC PPI tax refund.

As a very last resort, you could contact HMRC if the SAR doesn’t reveal anything. By explaining your situation to HMRC, they should be able to tell you how much tax was taken from your settlement. Their systems will have this information, so you will be able to work out roughly how much tax was paid. An HMRC PPI tax refund could be due providing you didn’t earn enough interest and overpaid on tax.

Since the introduction of the personal savings allowance in 2016, most payouts were automatically checked to see if tax should be deducted. The rest had an automatic 20% tax applied to them, which may have been unfair in some cases. By making a claim for an HMRC tax refund on PPI, you could see this money back.

How Much Interest Can I Earn a Year?

Without paying tax on interest, you can earn up to £1,000 a year. Basic rate taxpayers can earn this amount, but higher rate taxpayers only receive half this. When you make a claim for an HMRC PPI tax refund, you can receive as much as this if the tax taken was a large sum and you didn’t make use of your full personal savings allowance. If you don’t pay tax, you can normally claim all of this interest back in full.

When Is the HMRC PPI Tax Refund Deadline?

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The final time you can claim a refund for PPI tax is 5th April 2024. This is because of two factors: the PPI deadline and the limit for backdating tax refunds. August 2019 was the cut-off point for submitting PPI claims for compensation. This means that, unless there were extraneous circumstances preventing you from hitting this deadline, no one received a PPI payout after this date. No one will be able to claim an HMRC PPI tax refund either.

As you can only backdate a financial claim by up to four years, the 2019/2020 tax year falls within this limit. This means that the current 2023/2024 tax year is your last chance to be able to make a claim for an HMRC PPI tax refund. By delaying your claim, you could be missing out on having these funds released to you.

How Much Am I Entitled To?

Making an HMRC PPI tax refund will only give you back a percentage of tax that you paid on a percentage of your payout. This means that it is only likely to be a couple of hundred pounds. The less of your personal savings allowance that you used for the 2019/2020 tax year, the more you will be able to claim back in any tax that was taken from your PPI policy.

If you earned almost as much interest in a year as your personal savings allowance permits, then you will only be entitled to the difference. You only pay tax on anything above this rate. Most people didn’t earn this much, so the tax was taken erroneously. Putting in a claim for an HMRC PPI tax refund can get you this money back. This is why it’s important to know how much interest was applied to your payout so you can see if you’re likely to get any money back.

How to Make an HMRC PPI Tax Refund

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There are a couple of options for claiming back this money. The first is to go through HMRC directly, while an alternative is to use a claims management company. If you want to try to get an HMRC PPI tax refund yourself, an R40 form needs to be completed and returned to them. These forms are often very confusing to anyone who is not used to filling in tax forms.

Once you know the amount that was taxed as interest, this needs to go on the R40 form, so make sure your calculations are correct. Any amount you’re claiming on should be separate from any fees that may have been deducted. It’s important to know your net and gross interest when claiming your HMRC PPI tax refund this way.

Alternatively, if you are not confident in filling out these tax forms, you can make use of a claims management company to process your HMRC PPI tax refund instead. You can also go through this option if you are unsure of the amount that was taken in tax. A claims company has a team of legal specialists who work with HMRC on a daily basis, and they know how much you are entitled to and can claim.

By filling in your details, you will be put in touch with a company that will do all the legwork for you. This is also useful if you won’t have time to submit a tax claim yourself before 5th April 2024. These companies can expedite your HMRC PPI tax refund and give you your tax back quickly.