Blackhorse car finance compensation explained

If your car was financed by Blackhorse between April 2007 and November 2024, you may be owed compensation under the Financial Conduct Authority’s (FCA) motor finance scheme. Blackhorse is part of Lloyds Banking Group. If you receive a payout that includes interest, income tax will usually have been deducted from the interest (22% from 6 April 2027), and you may be able to reclaim some or all of it from HMRC.

Update, 3 October 2026: Since this article was first published, the FCA confirmed its final scheme rules on 30 March 2026. Four parties then challenged the scheme, and on 2 July 2026 the Upper Tribunal suspended parts of it. Lloyds is not one of the challengers. Lenders don’t currently have to calculate or pay compensation under the scheme, and the FCA expects payments to begin in 2027 if it is upheld (FCA).

Who Blackhorse is

Blackhorse is the motor finance brand of Lloyds Banking Group and one of the biggest car finance providers in the UK (ITV News). It funded PCP and hire purchase (HP) agreements arranged at car dealers, who acted as credit brokers and were often paid commission by the lender.

Some of those deals used a discretionary commission arrangement, which let the dealer raise your interest rate to earn more commission. The FCA banned these from January 2021. Its scheme also covers high commission and undisclosed ties between lender and dealer.

What Lloyds has set aside

Lloyds was the first UK bank to set money aside for this issue. In February 2024 it made a £450 million provision (ITV News). After the FCA published its proposals, Lloyds added £800 million in October 2025, taking the total to £1.95 billion. At the time it said it would challenge parts of the FCA’s method (Reuters).

A provision is the bank’s estimate of total cost. It isn’t a figure for any individual customer.

How the FCA scheme works

The FCA’s final rules were published on 30 March 2026 (FCA):

• Agreements taken out between 6 April 2007 and 1 November 2024, where the lender paid the broker commission, are in scope.
• The FCA estimates 12.1 million eligible agreements, with average compensation of around £830.
• Simple interest is added at the annual average Bank of England base rate plus 1%, with a minimum of 3% a year.
• The final deadline to complain is 31 August 2027.

You can’t use the scheme if you’ve already accepted compensation, or if the Financial Ombudsman Service or a court has decided your complaint (FCA).

Complaining to Blackhorse is free, and the FCA says you don’t need a claims firm or law firm to take part. If you had more than one car on finance, see our guide to multiple PCP and HP claims.

The tax on a Blackhorse payout

The compensation itself isn’t taxed as income. The interest added to it is treated as savings income, and the lender deducts basic-rate tax (22% from 6 April 2027) before paying you. Our overview of whether car finance compensation is taxable explains why. Your payout letter should show the gross interest, the tax deducted and the net amount. Keep it, because HMRC asks for those figures when you claim (GOV.UK).

Whether you’re owed tax back depends on your income and allowances (GOV.UK):

• Personal Savings Allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, £0 for additional-rate taxpayers.
• Starting rate for savings: up to £5,000 of interest tax-free if your other income is low.

As general rules, non-taxpayers can usually reclaim all the tax deducted, basic-rate taxpayers up to £200, and higher-rate taxpayers some or none, depending on the amount. Other savings interest in the same tax year counts towards your allowance too.

The repayment is usually claimed on form R40, up to four years after the end of the tax year you were paid. If you’re in Self Assessment, it goes through your tax return. When you use our service, we check whether you’re likely to be owed anything, work out the right tax year, prepare and submit the R40 as your agent, and pay you the balance after our fees. Our how it works page explains the process.

Your next step

Try our calculator to estimate the tax you might get back on a Blackhorse payout, or read more on our Blackhorse page.