PPI payout and tax credits

[BubbleAnimal]

Hi

I have been offered a good pay out for PPI from 15 years ago. I am aware that I have to pay tax on the interest and it is classed as "income".

Couple of questions if anyone can help?

1. Bank have taken 20% income tax already under HMRC guidelines from October 2013. Does this mean I don't have to do anything with HMRC or do I need to tell them about the payout separately?

1. Tax credits - I am claiming as currently I earn just under £15k a year as a single parent of 2. However, this interest will take my "income" for this year up substantially. I know I need to ring them - do I tell them just the interest and not the rest? I'm aware my tax credits will now be heavily affected, but obviously will use the payout to cover that amount.

Thanks.

Just be honest with tax credits whatever you do. Let hel know the full ins and outs and go from there. I have no idea if you are allowed a set amount of savings before tax credits count as income though, you may be

Why is it considered as income?
They only look at earned income for tax credits unless it's changed.
I called them when I'd inherited and they didn't want to know, said it was fine and not earned income.
Just be honest with them and they'll be fine.
Best to do it straight away though, I contacted them the minute my money hit the bank.

Oh I will ring tax credits for sure, as soon as that money hits my account. I do worry I'll be left really short each week though I admit.

I'm confused as to whether I need to speak to HMRC though?

It used to be that money in an ISA didn't count as the interest was tax free, so put it in an ISA and then ask or visa versa

As far as I'm aware they don't include anything that hasn't been earned or savings.
It does change once UC comes in as that is a benefit, not a tax break for working people redefined by the tories and their followers as benefit.

Surely it's not counted as income, as it's reparation of monies already over paid?

The repayment doesn't count as income. Nor the usual interest.

However the additional 8% interest IS counted as income for the HMRC and has come already taxed at 20%. It is classed as income from savings, but only this amount (in my case around half the amount paid, as it dates back 15 years)

This is the exact wording on the letter.