TaxPersonal TaxTax shock awaits compensation winners

Tax shock awaits compensation winners

People who receive compensation payouts for financial mis-selling will be penalised by the Inland Revenue if they don't pay the appropriate tax on the money.

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Under current rules, tax is due on all compensation payments, except for those for pension mis-selling or personal injury claims.

At present accountants fear that many people who receive compensation payouts are unaware of the tax demands on them, the Daily Telegraph reported.

The rate is 20% for basic rate taxpayers and 40% for higher rate taxpayers.

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