This FAQ explores whether compensation from a successful mis-selling claim on your car finance might have tax implications in the UK.
Generally, the core compensation for mis-selling is not subject to income tax. It's viewed as getting back money you shouldn't have lost in the first place.
However, there's one key exception:
Example:
Imagine you receive £3,000 in mis-selling compensation, with £100 being interest earned during the claim process. In this case, only the £100 interest would be liable for income tax, not the main £3,000 compensation.
Seeking professional advice is recommended if:
Further Resources:
Disclaimer: This information is intended for general awareness only and does not constitute formal tax advice. Always consult a qualified professional for personalised guidance on your situation.
Generally, the core compensation for mis-selling is not subject to income tax. It's viewed as getting back money you shouldn't have lost in the first place.
However, there's one key exception:
- Interest earned: Any interest that accrued on the compensation while your claim was processed may be subject to income tax.
Example:
Imagine you receive £3,000 in mis-selling compensation, with £100 being interest earned during the claim process. In this case, only the £100 interest would be liable for income tax, not the main £3,000 compensation.
Seeking professional advice is recommended if:
- You're unsure about the tax implications specific to your claim.
- The compensation amount is significant.
- A substantial amount of interest is included in the compensation.
Further Resources:
- Her Majesty's Revenue & Customs (HMRC): https://www.gov.uk/government/organisations/hm-revenue-customs
Disclaimer: This information is intended for general awareness only and does not constitute formal tax advice. Always consult a qualified professional for personalised guidance on your situation.
