NatWest tax levy makes compensation seem less like an apology

I received £9 compensation from incorrectly charged overdraft fees. Why was this subject to tax?

I received a letter from NatWest telling me that it had incorrectly charged overdraft fees, and that interest would be refunded. It offered me £9 in compensation which it suggested was subject to tax. Why, when ex-gratia payments from other companies are not? PL, London

NatWest says the taxable sum is on the interest owed, not the compensation. “If they are still a customer, they will receive the funds net,” a spokeswoman says. “If not, we send it gross but advise that tax may be payable.” The amount of deductable tax depends on your tax status and it is up to you to inform HMRC if the incorrect rate has been applied.

A full breakdown of when tax is payable on compensation is available from the Financial Ombudsman Service.

If you need help email Anna Tims at or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Please include an address and phone number.

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