PPI ...

[frazzledbutcalm]

In a nutshell ... I've put in a mis-sold PPI claim ... had letter saying my claim is upheld, I'm entitled to the money back. BUT, the company has halved my money from the £4000+ claim to just under £2000 payment back. They've taken off 20% income tax, early settlement difference, interest at 8% ...
Does anyone have any idea if they can do this? The PPI was added onto a business loan so I can't understand why I have to pay income tax on money that was mine anyway .... ?
TIA

Yes they can. Tax must be paid on it but they found people never actually bothered declaring it so new rules mean the tax has to come off first now.

The early settlement part is because you would have received a rebate of the premium at the time you settled early.

They should have added 8% on though, not taken it off (though it may just be the way your post is worded).

Thanks. TBH I really don't understand it at all! After reading my letter several time I think you're right, they've added 8% to my payment. My original paperwork said the PPI was £4000 over the term of the business loan. I settled the whole loan 1 year later. I assumed my claim would be for the full £4000 but I guess I never paid the full £4000 originally ?? I'm confused about the income tax though... If it was a business loan, I paid them back, they're now giving me my own money back which was wrongfully taken, then how can it be considered as income?

The compensation should be tax free but the interest they've paid should be taxed. It is exactly the same as if you had invested the money instead of using it for PPI - you would pay tax on any interest your money earned.

Ahh ok ... that makes more sense now! It's so obvious when you put it like that!

I've completely not understood my letter .. But pourquoi and prh .. you've both made me understand more ... I'd misinterpreted the whole thing I think!