If you had compensation for more than one car finance agreement, what matters is the tax year each payout was paid in. Payouts in the same tax year are added together on one R40 claim to HMRC. Payouts in different tax years are separate claims, and each year has its own allowances.
Why the tax year matters
A UK tax year runs from 6 April to 5 April. Interest is taxed in the year it’s paid to you, not the year you took out the finance or made the complaint.
So if one lender paid you in June 2026 and another in March 2027, both fall in the 2026 to 2027 tax year. If the second one was paid in May 2027 instead, it falls in the 2027 to 2028 tax year.
Check the payment date on each lender’s letter, or the date the money reached your bank account.
One claim per tax year
The R40 is a claim for a whole tax year. GOV.UK says you need to submit a separate application for each tax year. It doesn’t say one per payout.
If you had two or three payouts in the same year, perhaps from different lenders, you include all of them on the same claim. You’ll need the letter or tax statement from each lender showing the gross interest, the tax deducted and the net interest. Our checklist of documents you need for a car finance tax rebate explains what to look for.
Claims can be made up to four years after the end of each tax year, so payouts from several years can be dealt with at the same time as separate claims.
Your allowance covers all your savings interest
Your Personal Savings Allowance applies to all your savings interest in a tax year combined. That includes:
- interest from every car finance payout in that year
- interest from bank and building society accounts
- other taxable savings interest
The allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nothing for additional-rate taxpayers. It isn’t given again for each payout.
Example: two payouts in the same year
Alex is a basic-rate taxpayer with no other savings interest. In the 2026 to 2027 tax year Alex receives two payouts:
- payout one includes £600 of interest, with £120 tax deducted
- payout two includes £700 of interest, with £140 tax deducted
Together that’s £1,300 of interest and £260 of tax. The first £1,000 is covered by the allowance. The other £300 is taxable at 20%, which is £60. Alex has paid £260, so the general rule is a repayment of £200.
If Alex had looked at each payout on its own, it would seem as if both were fully covered. That’s why it’s important to put everything from the same year together.
Example: payouts in different years
Now suppose payout two was paid in May 2027, in the next tax year. Each year is then looked at separately:
- 2026 to 2027: £600 of interest, all within the allowance, so £120 back
- 2027 to 2028: £700 of interest, all within that year’s allowance, so £140 back
That’s £260 in total across two claims. Splitting across tax years can mean more is repaid. You don’t choose when lenders pay, but it explains why two people with similar payouts can get different results.
Your tax band can change between years
Your income may be different from one year to the next. You might be a basic-rate taxpayer one year and a higher-rate taxpayer the next, or have retired in between. Each claim uses your income for that particular year.
See our guides for non-taxpayers and higher-rate taxpayers for how the rules change by band.
PCP and HP together
It doesn’t matter whether your agreements were PCP, HP or a mix. The interest is taxed the same way. Our guide to PCP vs HP explains why.
How we handle multiple payouts
Several payouts mean several letters, possibly several tax years, and a different answer for each year. When you use our service, we sort your payouts by tax year, check your income and other savings interest for each one, and prepare and submit an R40 for each year as your agent. We deal with any HMRC queries and pay you the balance after our fees. If you’re registered for Self Assessment, the interest goes on your return for that year instead.
Our guide to what an R40 form is explains the form, and our how it works page sets out our process.
Next step
Gather the letters from each lender and sort them by tax year. Then use our eligibility calculator for each year to get a rough estimate. Individual circumstances vary.