my packaged bank account compensation

[Bettybooby]

After a terrible time with a horrible bank I managed to get my money back plus interest in one week. I'm really pleased but a bit confused about the tax thing.
I'm on working tax credits as DH works but I don't yet.

Their letter says:
the 8% interest is an interest payment. this will constitute as taxable income. we're obliged to deduct income tax at the basic rate (20%). If we've deducted more than you pay you can reclaim.

So...is my whole interest payment tax deductable, meaning i can't keep it all? does the money the bank have deducted come back to me in the form of a cheque or through my tax credits?

I'll be so relieved if anyone can help me on this one!

So they have paid you back money plus added on 8% interest? They will then deduct 20% of that interest amount (tax) before giving you your payment. Have the bank not said how they are returning the money to you?

It has nothing to do with tax credits so it won't come via them. If you think you shouldn't be paying tax on your interest then you claim it back from HMRC

Thank you. I'm not well at the moment and my brain isn't working properly!
I got the cheque already. So it's separate to tax credits? OK I'd better phone HMRC!

It's nothing to do with tax credits, it's tax paid on interest on bank accounts and goes to HMRC.

www.gov.uk/apply-tax-free-interest-on-savings

Looks like you need to fill in an R40 form to claim it back

Thank you so much!