How Do I Claim a PPI Tax Refund in 2023?
- The deadline for PPI tax refunds is 5th April 2024
- What the PPI tax refund from HMRC is
- How to make a claim
When it comes to tax, it usually gets taken from everything. PPI payouts were susceptible to tax when it came to interest, so you may have had a smaller settlement than you were expecting. However, you may be able to claim this back, entitling you to another payout from a PPI tax refund.
This article will go over what a PPI tax refund from HMRC is, why you’re able to claim it and when the deadline is. When it comes to reclaiming tax in 2023, the countdown is on before it’s too late to reclaim PPI tax. Even though the deadline for making a PPI claim passed a while back, it’s not yet impossible to get the tax refunded.
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What Is a PPI Tax Refund?
When you received a PPI payout, 20% tax was automatically deducted from the interest. This reduced how much you received in compensation, but mostly this was unfair as many people did not need to pay this tax. Since 2016, you’ve been able to earn a certain amount of interest a year without having to pay tax on it.
Personal Savings Allowance
The personal savings allowances have been in place since 6th April 2016. When it was introduced, any subsequent PPI payouts were automatically checked to see if they had any tax taken off them.
The personal savings allowances (what you can earn tax-free) are as follows:
20% rate taxpayer: £1,000 in interest a year
40% rate taxpayer: £500 in interest a year
45% rate taxpayer: no allowance
Basic rate taxpayers earn between £12,571 and £50,270. Higher rate taxpayers earn between £50,271 and £125,140. Additional rate taxpayers earn over £125,140.
Although the additional rate of tax has been lowered since April 2023 from £150,000, anyone earning this much still does not qualify for a personal savings allowance. This also doesn’t affect 40% taxpayers making a PPI tax refund as the personal savings allowance is unchanged.
Why Can I Reclaim Tax?
Thanks to the introduction of the personal savings allowance, you can earn up to £1,000 in interest from any of your income completely tax-free. As savings interest rates haven’t been high in recent years, this means that anyone who was taxed on a PPI payout could be entitled to it all back. It’s probably worth checking to see how much interest you have earned a year to see if there’s anything left.
A PPI tax refund gives you a chance to claim any of this interest back, providing you didn’t earn more than your savings allowance permitted. As PPI payouts were potentially thousands of pounds, this means you may have had hundreds deducted in tax. If you want to make a PPI tax claim, it needs to be done before the deadline.
When Is the Deadline for Making a PPI Tax Refund?
The very final time you could make a claim for PPI was back in 2019. As you can only backdate tax claims by up to four years, this means the current 2023/2024 tax year is your last chance to see if you are eligible for a PPI tax refund. HMRC isn’t advertising this or reminding you to make a claim because after 6th April 2024, they will keep any money you might be entitled to.
You have until the 5th April 2024 to make a claim for a PPI tax refund. As August 2019 was the deadline for a PPI claim, you will not be able to claim any tax back in subsequent years. This also means that any payouts before 6th April 2019 have already passed the deadline.
Just because the deadline is in 2024, it doesn’t mean you need to wait. Getting your claim in early guarantees that you won’t pass up on your final chance to see if you’re owed money back! The longer you leave it, the less likely you’ll remember to get it done.
What Dates Qualify?
The last dates that qualify for a PPI tax refund are any payouts that were received between 6th April 2019 and 29th August 2019. Any historic claims are beyond the deadline and no payouts were received after this date.
How Do I Know If I Paid Tax on PPI?
The best way to check if you paid tax on your PPI payout is to look at your refund statement. It should detail if any tax was deducted. If you don’t have this paperwork or there isn’t a breakdown on your statement, you can request this from the company that issued the refund.
Can I Backdate a PPI Tax Claim?
You can only backdate a PPI tax claim at the moment as this is the last time anyone who qualifies can make a claim. While tax claims can be backdated for four years, we are on the cusp of the fourth year. As no PPI claims could be made after 2019, you are unable to claim PPI tax for the last three years or for 2023.
How Much Are PPI Tax Refunds Worth?
This depends on how much your PPI claim was, so while it could be much more for some people, it can equally be a lower amount for others. To put it into perspective, for every £100 that was issued as a refund, £20 was deducted in tax.
The total amount of your PPI tax refund also depends on how much of your personal savings allowance you made use of. If you were close to the limit of your allowance, you won’t receive as much in compensation. Likewise, if you didn’t receive much interest in 2019, you will be entitled to more. For some people, this could be the full amount of tax that was deducted from their settlement.
How to Claim a PPI Tax Refund
There are a few ways to claim. You can request a PPI tax refund from HMRC by filling in an R40 form or you can make use of a claims management company.
PPI tax refunds through HMRC require paperwork to be filled in. The R40 form refers to tax refunds from savings and investments. It can either be completed online or by hand to be posted, but this process can be tricky to understand. HMRC doesn’t necessarily make these forms entirely user-friendly, which is an issue when it comes to the layman requesting a refund. Not everyone will be familiar with filling in forms related to tax, income or refunds.
If you are self-employed (or were at the time), you can’t claim a PPI tax refund this way; you need to complete this on your self-assessments.
Claims Management Company
For anyone who is unable to make a claim through HMRC or simply doesn’t have the time, a claims management company could be the best solution. The closer the 5th April 2024 gets, the easier it will be to rely on the expertise of a company that deals with refunds and liaises with HMRC on a daily basis.
The best part about making a PPI tax refund through a claims management company is that they do all the hard work for you. After you submit your details, they will check to see if you’re eligible and process your claim. Meanwhile, you can carry on with your busy life without having to worry about filling in any paperwork.
To find out if you’re eligible to make a PPI tax refund, fill in your details using the button below.