Did you receive a PPI payout? Claim a PPI Tax Refund for any past mis-sold Payment Protection Insurance Payments with Claim My Tax Back.

Calculate Your Estimated PPI Tax Claim Amount Using 

What Is the PPI Tax Allowance?

Payment protection insurance (PPI) is designed to cover repayments in certain circumstances where you couldn’t make them yourself.

These include if you are made redundant or couldn’t work due to an accident, illness, disability, or death. To understand the origin of the PPI Tax Allowance, you need to understand the PPI Tax Scandal. 

PPI Scandal

As many as 64 million PPI policies were sold in the UK, mostly between 1990 and 2010, some as far back as the 1970s. The majority of these policies were mis-sold.

Complaints started in early 2004 and the scandal received new prominence in 2005 when Citizens Advice issued a so-called super-complaint to competition watchdogs about what it described as a “protection racket”.

It started with a series of events that led to the compensation payments to consumers and sales of some types of PPI being banned.

As of August 2019, banks, building societies, and other credit providers had paid an astonishing £36bn in compensation to those who were mis-sold PPI and made a claim. The typical pay-out was £2,000.

PPI Tax Refund Allowance

If you have successfully made a PPI claim, most lenders/banks will have deducted the tax at the basic 20% rate before sending you payment even if you are not a taxpayer.

Also, the introduction of the 2016 Personal Savings Allowance means you can earn up to £1000 tax-free on your savings interest every year. This also applies to the statutory interest paid on PPI claims.

So, to sum up, most people who have received PPI pay-outs since April 2016 have been taxed incorrectly. Now the good news is that HMRC understands this issue and is happy to return the incorrect tax deducted, as long as you make an application for the PPI tax refund.

What if my employer reimburses me?

You may still be able to claim depending on how much your employer pays you per mile. There are specific amounts on which HMRC are prepared to allow tax relief (see below). If your employer pays you less than this, you can claim a tax rebate on the difference.

What Makes Up a PPI Tax Refund?

The money you get paid back for a PPI claim can have up to three main elements:

Of these, only the third element is liable to be taxed (usually at 20%). This is usually shown on the payout statement. 

Why you may be owed tax back on PPI pay-out’s interest

If tax is due on PPI pay-outs, most lenders will have deducted it automatically at the basic 20% rate before you get the money, but if you are a non-taxpayer then you have the right to claim all of the money back from HM Revenue & Customs (HMRC).

In April 2016 the personal savings allowance was introduced which allows taxpayers to earn up to £1,000 a year tax-free on their savings which includes the statutory interest paid on PPI claims. Since then, while most savings interest has been paid ‘gross’, ie, without any tax being taken off, PPI still has 20% automatically deducted.

And as PPI is taxed as a lump sum payment at the point it is paid, most people who have paid tax on PPI pay-outs are entitled to some money back. Tax is deducted at the basic 20% rate, so for every £100 of statutory interest you earn, you pay £20 in tax.

To give you an idea of how it relates to the size of PPI pay-outs see the chart below – but there are many other factors.

Total PPI Reclaim Tax Taken Off At Source

Total PPI Reclaim

Tax Taken Off At Source

PPI Taken Out 3 yrs before

PPI Taken Out 5 yrs before

PPI Taken Out 10 yrs before

















The Tax you can Reclaim on Pay-outs after 6 April 2016

The PPI payout is taxed in the year it is paid, so even if you took out a PPI policy in, say, 2004, if it was repaid in 2016, it’s that later tax regime that counts.

If you were a non-taxpayer in the year the PPI was paid out (eg, currently that means those earning less than the £12,570 (personal allowance)), unless the statutory interest pushes you over the tax-paying threshold, you can claim all the tax back.

For most taxpayers, as well as the normal income-tax personal allowance, since 6 April 2016, the personal savings allowance is a further specific amount you are allowed to earn tax-free just on savings interest:

  • Basic 20% rate taxpayers (earning c. £12,571-£50,270) can earn £1,000 in interest a year tax-free.

  • Higher 40% rate taxpayers (earning c. £50,271-£125,140) can earn £500 in interest a year tax-free.

  •  Top 45% rate taxpayers (earning over £125,140) don’t get a personal savings allowance.

If the total interest earned from savings and PPI statutory interest is less than your personal savings allowance, you are due all PPI tax paid back.

You can only claim back four tax years, as well as the current one, which means the furthest you can go back is the 2019/20 tax year. (ie since April 2019)

Claims for PPI payments received before April 2016

As basic-rate taxpayers should have been paying 20% tax, and that’s what was automatically deducted, there’s nothing to claim back.

Yet non-taxpayers or those earning just enough to pay tax but not much more, so we’re on the starter savings should be able to reclaim some or all the tax on this just like other savings income.

How Can You Claim Back The Tax On Your PPI Pay-Out?

If you believe you’re owed tax back and haven’t reclaimed it, the simple answer is to use the ‘Claim a refund of income tax deducted from savings and investment’ form R40 (or form R43 if living overseas).

Yet HMRC makes these forms pretty complicated, as it includes a whole host of other things too. So it may be a struggle for those who normally just pay tax via PAYE (ie, the payroll).

Who Can Claim a PPI Tax Refund?

If any of the below apply you may be due a PPI Tax Refund

Some examples of PPI Tax Claims


Peter received his PPI payment in Nov 2016, so this falls into the 2016/2017 Tax year i.e. between April 2016 – April 2017. Peter was earning £30k in this tax year, so he was a 20% taxpayer. Peter’s PPI pay-out included £700 of statutory interest (as stated in his final response letter from his bank)

Peter also had some savings, which earned him £320 in interest. As his total interest was £1020, he should only have been taxed for the £20 over his £1000 personal savings allowance (PSA) which would have been £4 tax.

In reality, he will probably have been taxed in full at source on the £700 at 20%, which resulted in £140 tax being deducted from his total PPI pay-out.


Ann received her PPI payment in May 2019. She was retired and did not pay tax in this tax year. Ann’s PPI pay-out included £1200 of statuary interest.

Ann was taxed on the £1200 at 20% (which was the standard tax applied to most statuary interest aspects of PPI pay-outs) resulting in a £240 deduction at source. As Ann was a non-taxpayer when she received her payment, she should not have been taxed this £240 and can claim it back.

Claim Your PPI Tax Allowance With Us

You can claim the HMRC PPI tax refund online with us. You will need to know the following information before you start the application. 

Why Choose Us For Claiming Your PPI Tax Allowance?

The process for claiming back the tax deducted from your PPI payment can be a little confusing as it involves opening a Govt account and completing pages of questions unrelated to your PPI tax refund claim.

We at “Claim My Tax Back” have streamlined the process to make it as easy as possible to complete. You only need to know the tax deducted from your PPI payout (which you can find on your Final Response Letter from your bank/lender.

Once you have completed the quick and simple online form, where you can also claim for wearing a uniform to work. We do the rest and also check with HMRC if you have overpaid tax in any of the last 4 years, which is then added to the final payment to you.

Once the claim is complete, we post out your payment to you in the form of a cheque.

You can make a claim for a tax repayment on your PPI interest using form R40 (or form R43 if you are living overseas). Before you start to complete the form, you will need to know the tax year you received your PPI payout and the total amount of tax deducted from your payment.

If you’d like to calculate the amount of PPI Tax Allowance you may be able to claim, find out through our PPI Tax Refund Calculator