Deposit Compensation - Information on Tax
16th September 2009
A recent change in tax law has clarified that where a compensation payment from FSCS includes an element representing interest and that compensation is paid after 6 October 2008 the interest element of the compensation is considered declarable income.
People completing tax return forms either because they are able to reclaim tax that has been deducted from interest or because they are liable to pay further tax on interest will need the following three figures relating to their compensation claim when filling in their tax return:
- The gross interest element
- The amount treated as if it were tax already deducted from the interest
- The net amount paid that relates to interest
Icesave customers who are eligible to pay tax on the interest they earn on their account were sent a letter containing the above information in June this year. The FSCS are now sending letters providing the above figures to customers of Kaupthing, Singer & Friedlander and London Scottish Bank who have received compensation. Letters are also being sent to Icesave Fixed Rate Savings Account holders who chose to take compensation at maturity of their account and who have received compensation.
As ISAs are tax free, consumers who have received compensation for an ISA will not be affected by this tax law change.
If you have any questions about your tax status please contact HMRC. More information on who will be affected by the taxation change can be found on the HM Revenue and Customs website. If you require any further information please contact us.