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Millions of people are facing an unexpected tax bill on their Payment Protection Insurance (PPI) claims payouts, the BBC has learned.
The banking industry has set aside £6bn to pay for the misselling of PPI.
Customers were awarded compensation plus interest of 8% by the Financial Services Authority on the money they originally spent on PPI.
This interest will be subject to tax - earning the government tens of millions of pounds.
A spokesman for HM Revenue & Customs told Radio 4's Money Box programme: "No tax is generally due on the repayment element of compensation paid to those missold PPI. However, the additional interest is taxable - in line with other compensation claims."
They said that "Nobody should be worse off, as had the customer not purchased PPI, but kept that money in an interest-bearing account, the interest received would have been taxable.
More:
http://www.bbc.co.uk/news/business-15701101
The banking industry has set aside £6bn to pay for the misselling of PPI.
Customers were awarded compensation plus interest of 8% by the Financial Services Authority on the money they originally spent on PPI.
This interest will be subject to tax - earning the government tens of millions of pounds.
A spokesman for HM Revenue & Customs told Radio 4's Money Box programme: "No tax is generally due on the repayment element of compensation paid to those missold PPI. However, the additional interest is taxable - in line with other compensation claims."
They said that "Nobody should be worse off, as had the customer not purchased PPI, but kept that money in an interest-bearing account, the interest received would have been taxable.
More:
http://www.bbc.co.uk/news/business-15701101
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