Declaring Interest on Your Tax return
When you are completing your tax return either online or on paper you have to declare the interest you have earned as further tax may be due depending on your income to which rate of tax you pay, this is because the interest is taxed and basic rate of 20% as the bank etc do not know what your earning are.
Bank Interest
Most interest will come to you net so the 20% basic rate tax has already been deducted so if you are a basic rate taxpayer you will have no further tax to pay on this.
However, if you are 40% or 45% taxpayer there will be additional tax to pay on this.
Untaxed Interest
If you earn interest that has not been taxed, you will have tax on pay on this regardless of the amount you earn per year.
PPI Claims
If you have made a PPI claim the money you would get from this will have two elements on this:
- Compensation this is the award that is for being charges for something that was not due.
- Interest-this is where you are being reimbursed for the amount you paid when you should not
It is the interest on the PPI claims that must be declared on your tax return, and this is often missed of the tax returns and any paperwork you receive relating to the claim should have the breakdown on it.