HMRC have published a note giving advice to individuals receiving interest paid on PPI compensation payments.

The note gives advice on the relevant tax position and what action might be needed if an individual has received interest paid on PPI compensation payments. Most payments of interest on PPI will come within the circumstances described but specific enquiries can be directed to HMRC.

Generally no tax is due on the compensation element of these payments received due to mis-sold PPI. However, the additional interest is taxable. The interest may or may not have had tax already deducted depending on the type of company making the payment of the interest.

The guidance is available in full at http://www.hmrc.gov.uk/news/news100512.htm