Postmasters' tax - how your payments are taxed

Payments made under the  GLO (Group Litigation Order) compensation scheme comprise loss of earnings and interest. Because the earnings calculation was done based on your net pay (after tax) the loss of earnings element is not taxable. Any interest paid is exempt from tax by a specific exemption introduced by HMRC. 

Payments for loss of earnings made under the Historic Shortfall Scheme were calculated based on your pre tax earnings and are taxable if more than £30,000; PAYE was deducted from the payment. Post Office will make a top-up payment to bring the rate of tax down to the basic rate - the top up payments are exempt from tax. In addition you will have been paid interest, on which tax was deducted at 20%. Part of the top-up payment will also reduce the tax on the interest which may be liable to higher rates.

If you have received a taxable compensation payment between 6 April 2022 and 5 April 2023 you will need to complete a tax return by 31 January 2024 and pay the tax due; this only applies to recipients of HSS payments. HMRC has committed to cancelling any penalties and interest incurred as a result of not being able to file by the due date, or to pay the tax due to not receiving a top up payment. 

HMRC has set up a dedicated support team to help and advise on your tax obligations in relation to your compensation payment. There is information here telling you what you need to do and explaining how penalties and interest will be dealt with. A dedicated phone line will open on 10 January 2024 with a specialist HMRC team ready to help. The number is 0300 322 9625 and the line is open Monday to Friday from 8am until 6pm