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Compensation for financial loss

Awards we make if you’ve lost money due to a claims management company's mistake.

Last updated: 15 July 2022
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  1. The money we can award
  2. Calculating compensation
  3. How compensation is paid
  4. How to pay tax on compensation
  5. Find out more

If you’ve lost out financially, we’ll look to put you back in the position you’d be in if the claims management company (CMC) hadn’t got it wrong.

We can also consider compensation for distress or inconvenience if the CMC’s mistake has had a practical or emotional impact on you.

The money we can award

If you’ve lost out financially, we can tell the CMC to compensate you for the loss it caused. Where it’s clear how much you lost, we’ll tell the CMC how much money it needs to pay.

There’s a limit to how much we can tell a CMC to pay. If we think compensation should be higher than our award limit, we can recommend that the CMC pays more. But we can’t make them pay anything over the limit. It's up to them whether they pay any extra or not. 

Compensation can also include interest.

Calculating compensation

Where it’s not clear how much you’ve lost, we’ll usually say how we think the CMC should calculate the compensation, rather than telling it a specific amount.

Although we tell CMCs how to calculate compensation, we won’t usually check the individual calculations unless you have a specific concern about them.

How compensation is paid

Most of the time, we’ll tell the CMC to pay any compensation directly to you. But if we don’t think that’s appropriate, we’ll explain why.

How to pay tax on compensation

If we say a CMC needs to pay you interest on an award, they should deduct income tax from it at the basic rate before they pay it to you.

They should pay it directly to HMRC and give you a certificate of tax deduction. If they haven’t given you one, you’ll need to ask for it.

The basic rate of tax may or may not be the correct rate for you to pay. It depends on your earnings and tax position. Check your situation below.

If you don’t earn enough to pay income tax

You can usually claim back the tax the CMC has deducted for you. You’ll need to contact HMRC to do this.

If you pay income tax at the basic rate

The CMC has already deducted the correct amount for you. You’ll usually need to mention the compensation amounts and deducted tax if you fill in a self-assessment tax return.

If you pay income tax at the higher rate

You need to tell HMRC about your compensation so it can be taxed correctly. You can declare the compensation to them or include it on a self-assessment tax return.

If you’re liable to pay capital gains tax on your compensation

You need to tell HMRC or declare it on a self-assessment tax return. The CMC won’t deduct capital gains tax on your behalf.