It's emerged that countless consumers, who were due to receive compensation following the mis-selling of PPI, will have to pay tax for their payouts.
It will be charged on the typical eight percent in lost interest given to people winning PPI claims on top of recompensed PPI repayments and may signify, on average 50 per claimant to be paid in tax, though people acquiring larger than usual PPI payouts must pay out considerably more and will lead to around 350m in total being paid back into the Treasury.
A high court decision a few months ago resulted in British banks being required to re-open a huge number of mis-selling claims regarding PPI, which had been an insurance policy bought at the selling time of personal loans, credit cards and other forms of debt and which had been sold to consumers whith the promise that they would meet the repayments in cases where they were made redundant or fell ill and were not able to work.
It will be charged on the typical eight percent in lost interest given to people winning PPI claims on top of recompensed PPI repayments and may signify, on average 50 per claimant to be paid in tax, though people acquiring larger than usual PPI payouts must pay out considerably more and will lead to around 350m in total being paid back into the Treasury.
A high court decision a few months ago resulted in British banks being required to re-open a huge number of mis-selling claims regarding PPI, which had been an insurance policy bought at the selling time of personal loans, credit cards and other forms of debt and which had been sold to consumers whith the promise that they would meet the repayments in cases where they were made redundant or fell ill and were not able to work.
It then surfaced that many of the consumers who acquired PPI had been mis-sold it since they wouldn't be eligible for a payout due to exclusions in the small print and there were many who were simply unaware that they had been subscribed to PPI, without knowledge of it.
The Financial Services Authority had introduced rules to prevent the mis-selling of PPI but the financial institutions complained that these rules were not fair because they were to be applied retrospectively and the British Bankers' Association (BBA) brought a high court challenge against the FSA and the Financial Ombudsman but was unsuccessful in the subsequent hearing.
Most of the financial institutions had put PPI complaints on hold until the high court ruling, but ever since then reimbursement is being released and it's calculated that banks will have to pay an estimated total payments of 4.5bn, made up of 3.2bn for looking at earlier PPI sales and 1.3bn for brand new claims received.
It is thought that around 6.4m people had been mis-sold PPI since 2005, and the average settlement payout is expected to be about 1,000 which is to include around 240 in interest. If that is taxed at the basic rate of 20% the Treasury will get about 48 but it will get more for those cases where higher rates of tax are paid. For instance, some payouts have been up to 16,000 which, if paid to a higher rate taxpayer, will result in over 1,500 being paid to the Treasury.
Consumer organisations have reacted with anger to this news with some people urging banks themselves to foot the bill. Marc Gander from the Consumer Action Group says it is an outrage that banks were selling overdrafts, personal loans and credit card loans at interest rates as high as 29% yet, in terms of having to pay compensation to customers, they are charged at only 8%. He said that they're "taking the mickey" out of both their customers and also the financial authorities.
HM Revenue & Customs, in a announcement, stressed that no tax is generally due on a repayment part of compensation received by those who were mis-sol
The Financial Services Authority had introduced rules to prevent the mis-selling of PPI but the financial institutions complained that these rules were not fair because they were to be applied retrospectively and the British Bankers' Association (BBA) brought a high court challenge against the FSA and the Financial Ombudsman but was unsuccessful in the subsequent hearing.
Most of the financial institutions had put PPI complaints on hold until the high court ruling, but ever since then reimbursement is being released and it's calculated that banks will have to pay an estimated total payments of 4.5bn, made up of 3.2bn for looking at earlier PPI sales and 1.3bn for brand new claims received.
It is thought that around 6.4m people had been mis-sold PPI since 2005, and the average settlement payout is expected to be about 1,000 which is to include around 240 in interest. If that is taxed at the basic rate of 20% the Treasury will get about 48 but it will get more for those cases where higher rates of tax are paid. For instance, some payouts have been up to 16,000 which, if paid to a higher rate taxpayer, will result in over 1,500 being paid to the Treasury.
Consumer organisations have reacted with anger to this news with some people urging banks themselves to foot the bill. Marc Gander from the Consumer Action Group says it is an outrage that banks were selling overdrafts, personal loans and credit card loans at interest rates as high as 29% yet, in terms of having to pay compensation to customers, they are charged at only 8%. He said that they're "taking the mickey" out of both their customers and also the financial authorities.
HM Revenue & Customs, in a announcement, stressed that no tax is generally due on a repayment part of compensation received by those who were mis-sol
It is thought that around 6.4m people had been mis-sold PPI since 2005, and the average settlement payout is expected to be about 1,000 which is to include around 240 in interest. If that is taxed at the basic rate of 20% the Treasury will get about 48 but it will get more for those cases where higher rates of tax are paid. For instance, some payouts have been up to 16,000 which, if paid to a higher rate taxpayer, will result in over 1,500 being paid to the Treasury.
Consumer organisations have reacted with anger to this news with some people urging banks themselves to foot the bill. Marc Gander from the Consumer Action Group says it is an outrage that banks were selling overdrafts, personal loans and credit card loans at interest rates as high as 29% yet, in terms of having to pay compensation to customers, they are charged at only 8%. He said that they're "taking the mickey" out of both their customers and also the financial authorities.
HM Revenue & Customs, in a announcement, stressed that no tax is generally due on a repayment part of compensation received by those who were mis-sold PPI and that not anyone should be worse off as, even if they'd not bought the PPI policy but had kept the money in an interest-bearing account, the interest would still have been taxable.
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Consumer organisations have reacted with anger to this news with some people urging banks themselves to foot the bill. Marc Gander from the Consumer Action Group says it is an outrage that banks were selling overdrafts, personal loans and credit card loans at interest rates as high as 29% yet, in terms of having to pay compensation to customers, they are charged at only 8%. He said that they're "taking the mickey" out of both their customers and also the financial authorities.
HM Revenue & Customs, in a announcement, stressed that no tax is generally due on a repayment part of compensation received by those who were mis-sold PPI and that not anyone should be worse off as, even if they'd not bought the PPI policy but had kept the money in an interest-bearing account, the interest would still have been taxable.
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