Unemployed (illness), successful PPI claim... Do I need to pay tax? Thanks.

[LeoandBoosmum]

Hi,
Hope some one can help... I have not been able to work for several years due to illness and claim ESA (Support Group). I have credit card debt from when I was able to work. Recently, due to a letter from the bank, I realised I may be able to make a PPI claim (I should have been informed my PPI would no longer apply due to my unemployment and wasn't). My claim has been successful and the bank will pay funds
into my account within 4 weeks of my acceptance. However, there is a part in the letter I don't understand. It basically states that the interest (just shy of ninety pounds) that will be reimbursed is subject to tax and should be included in my Tax return. Obviously, I don't currently submit a tax return as I am unemployed due to ill health. Need I do anything?
I have no savings at all, only debt! The PPI reimbursement (from money I shouldn't have paid over the past several years) will, thankfully, cover most of what I still have left in credit card debt. I'm just concerned about this tax thing...
I am currently living at home, me and my mum (no kiddies..unless you count dogs!).
Can anyone chip in?
Thanks so much, LeoandBoosmum.

Some of the banks will deduct the tax automatically before they refund you, do you know if yours will be doing that? If so, you will need to claim it back from HMRC. If not, I don't think you need to do anything except declare it to the benefits people as income.

Thanks. I rang the tax and it's sorted out. I don't think I have to declare it to the benefits people as it falls way below the savings threshold of £6000 which I believe is the amount you can have before you have to let them know. I'm basically getting back money I shouldn't have paid in PPI and it will just offset my credit card debt. Thanks for replying. I appreciate it.

No problem. I would check with the benefits people as it (i.e. the 8% interest only, not the whole refund) counts as income, which is why you need to declare it for tax if you're earning. Income has a different impact on benefits than savings does.

Thanks SolomanDaisy. When I asked the tax guy today (I called for advice to be on the safe side) he told me that as the 8% interest is so low (just under ninety pounds) I need do nothing at all with regard to HMRC/ DWP. Unfortunately, I'm not able to work at the moment due to illness. This has been for several years so I have had no earned income during this time. Thanks again. I appreciate your taking the time to help.