Compensation Interest Calculator
Calculate the interest owed on your car finance refund using the Financial Ombudsman's standard 8% rate or the Bank of England base rate + 1%.
Interest Rate
3 Simple Steps
- 1.Choose your interest rate
- 2.Enter the amount owed
- 3.Set the date range
Estimates only. Verify calculations with official FOS guidance for disputes.
How to Use This Calculator
- Enter the amount owed (the refund or compensation you're claiming)
- Select the start date (when you paid or were first deprived of the money)
- Select the end date (today, or when you expect payment)
- Choose your interest rate based on your situation
How Is Interest Calculated on Compensation?
The Financial Ombudsman Service calculates interest using simple interest, not compound interest. This means you earn interest only on the original amount, not on accumulated interest.
For complaints referred before 1 January 2026, the FOS uses a flat 8% per year. From January 2026, they switched to the Bank of England base rate plus 1%, calculated as a time-weighted average if rates change during your claim period.
What Interest Rate Will I Get?
The rate depends on how and when you make your claim:
- FOS complaints (before Jan 2026): 8% simple interest
- FOS complaints (from Jan 2026): BoE base rate + 1%
- County Court claims: 8% statutory interest
- Late payment of FOS awards: 8% (regardless of when referred)
The current Bank of England base rate can be found on the Bank of England website.
Do I Have to Pay Tax on Compensation Interest?
Interest on compensation is paid gross (without tax deducted), but it may be taxable income. The interest counts towards your Personal Savings Allowance:
- Basic rate taxpayers: £1,000 allowance
- Higher rate taxpayers: £500 allowance
- Additional rate taxpayers: No allowance
If your total savings interest (including compensation interest) exceeds your allowance, you'll need to declare it to HMRC. The main compensation amount itself is usually not taxable—only the interest portion.
Frequently Asked Questions
The 8% interest rate is the standard rate used by the Financial Ombudsman Service (FOS) for compensation awards on complaints referred before 1 January 2026. It's also the statutory interest rate for County Court judgments. This rate compensates you for being without your money during the dispute period.
Interest on car finance refunds is calculated as simple interest from the date you were deprived of the money until the date of payment. For FOS complaints before 2026, use 8% per year. For complaints from 2026 onwards, use the Bank of England base rate plus 1%. Multiply the refund amount by the rate and the number of days, divided by 365.
Interest on compensation is paid gross (without tax deducted) but may be taxable depending on your circumstances. It counts towards your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate). If you exceed your allowance, you may need to declare it to HMRC via self-assessment.
From 1 January 2026, the Financial Ombudsman Service uses the Bank of England base rate plus 1 percentage point for calculating interest on compensation. If the BoE rate changes during your claim period, a time-weighted average is calculated. This replaced the previous flat 8% rate for new complaints.
Yes, if you're entitled to a refund under the Consumer Rights Act 2015, you can also claim interest from the date you paid for the vehicle (or rejected it) until the refund is paid. The rate depends on whether you go through the FOS or courts, but 8% is typical for both.
No. Interest is only calculated on the contractual or financial elements of your compensation—such as refunds, overcharges, or money you were deprived of. Payments for distress, inconvenience, or emotional impact are separate awards and do not attract interest. Only include the principal financial amounts when calculating interest owed.
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