How much Federal Tax will I have to pay if?

How much tax will I pay on PPI refund?

• Hi, hope someone can help! Yesterday I found out I will be getting my PPI refunded, which I am very pleased about! I know I have to pay tax on the 8% interest part - but not sure at what rate. The loan and the credit card were both closed years ago and since then I have been a student (so not a tax payer), in the 20% bracket and am now in the 40% bracket (since last Sept). Will I have to pay 40% as that is what tax I pay now? Or will it be worked out according to the different years (i.e. if I'd had that money in the bank when I was a student I wouldn't have paid any tax on the interest at that time?) Hope this makes sense Thanks for reading!

• Answer:

  You get the interest on the refund now so you pay tax on the interest now. Sorry but that's the rules. If you are a higher rate taxpayer you pay higher rate - but only on the interest part.