Ppi Figures Explanation

[chrissa1]

My friend has just received a PPI payment of £2916.73, made up as follows.

Total amount of PPI premiums charged £1507.18
Total amount of associated interest £359.01
Applicable 8% gross interest £1313.18
Less witholding tax - £262.64

Total amount payable £2916.73

Can anyone explain how these figures are reached given that the first figure is correct?
Thanks.

[rojash]

1st figure is amount charged
Presumably they included the PPI as part of the loan, so charged interest on it.
2nd figure is the amount of interest that they charged and must refund.
3rd figure is the amount of interest due to your friend on the amount of money that they ripped him off for at 8% gross fro whatever period they held the money.
4th figure is the tax owed on the interest accrued.

Add 1,2 & 3, deduct 4 to get the amount payable.

[factor-fiction]

Note that the tax figure is 29% of the accrued interest (on the basis that interest would normally be taxed at source).
If she is a 20% taxpayer then everything is fine. If she isn't/hasn't been a taxpayer you may be able to reclaim the tax- it's worth checking with HMRC

[chrissa1]

Thanks rojash. So they get fig 3 from fig 2? We don't understand. :/

[chrissa1]

She is a tax payer.

[factor-fiction]

Figure 3 is based on the interest that would have been earned at 8% on figure 1 and probably also fig 2

[factor-fiction]

line 1 is premiums you paid.
line 2 is the interest charges you paid.
line 3 SI the notional interest at 8% you could have earned if you had invested the money rather than spending it on PPI
line 4 is tax at 20% on that interest in line 3

[factor-fiction]

I know I have said pretty much the same as rojash said

[chrissa1]

We're getting there ff. So if we take line 1 and times it by 29% and then times it by the number of months/years, that's how we get line 3??

[factor-fiction]

Where did you get 29% from?

[chrissa1]

From you ff.

[factor-fiction]

Usually the calculation will be explained on the paperwork.
But I am more than 99% sure it will be right as there is a standard methodology for working the interest out. The total repayment looks pretty good compared with how much was paid so maybe your friend could leave it like that.

[chrissa1]

Ok. Thanks factor-fiction.

[factor-fiction]

Ah- I see- sorry, I typed 29% tax rate instead of 20% (no lights on in here).

No the 20% tax figure is applied after line 2 and line 3 have been worked out.

It looks reasonable to me, but without the exact timings I can't work out a precise figure. It will be right but if she's unsure she should ask them to set out the precise calculation.
There is the risk then though that they may have miscalculated and offered too much

[chrissa1]

She's going to keep schtum thanks ff.