Understanding compensation for financial loss
If we find you’ve been treated unfairly, we have the power to tell a business to put things right.
We have separate guidance on compensation for distress or inconvenience.
Financial compensation
Where you’ve lost out financially, we can tell the business to pay you money to put things right. That might mean:
- awarding you a specific amount
- telling the business to reimburse costs
- telling the business how to calculate the amount you should receive.
We may also decide a business needs to put things right in a way that doesn’t involve paying money, for example, by amending your credit file.
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Where it’s clear how much you lost, we’ll tell the business how much money it needs to pay. For example, if you paid a fee on your account that you shouldn’t have, we might tell the business to refund that amount.
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We don’t often award costs but we will think about what’s fair in each individual case.
Occasionally, we might tell a business to reimburse some or all of the costs that resulted from the problem you're complaining about.
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Where it’s not clear how much you’ve lost, we’ll usually say how we think the business should calculate the compensation, rather than telling it to pay a specific amount.
For example, a business may have advised you to open an investment or bank account that wasn’t right for you. To work out how much the compensation should be, we will tell the business to look at what your money would be worth now if it had given you suitable advice.
Although we tell businesses how to calculate compensation, we won’t usually check the calculations that the business makes.
The limits that apply
There is a limit to how much we can tell a business to pay when we uphold complaints. We can recommend they pay you more if we think it’s fair, but the business doesn’t have to accept that recommendation.
If we think your compensation is over this limit, we’ll contact you about what that means.
For cases referred to us on or after 1 April 2026, about 'acts or omissions' – that is, the cause of the complaint – that occurred on or after 1 April 2019, our award limit is £455,000.
Different limits apply depending on when the case was brought to us.
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Different limits apply depending on when the case was brought to us:
- £455,000 for complaints referred to us on or after 1 April 2026 about acts or omissions that occurred on or after 1 April 2019.
- £445,000 for complaints referred to us on or after 1 April 2025 about acts or omissions that occurred on or after 1 April 2019.
- £430,000 for complaints referred to us on or after 1 April 2024 about acts or omissions by firms on or after 1 April 2019.
- £415,000 for complaints referred to us on or after 1 April 2023 and 31 March 2024 about acts or omissions by firms on or after 1 April 2019.
- £375,000 for complaints referred to us between 1 April 2022 and 31 March 2023 about acts or omissions by firms on or after 1 April 2019.
- £355,000 for complaints referred to us between 1 April 2020 and 31 March 2022 about acts or omissions by firms on or after 1 April 2019.
- £350,000 for complaints referred to us between 1 April 2019 and 31 March 2020 about acts or omissions by firms on or after 1 April 2019.
- £205,000 for complaints referred to us on or after 1 April 2026 about acts or omissions that occurred before 1 April 2019.
- £200,000 for complaints referred to us on or after 1 April 2025 about acts or omissions that occurred before 1 April 2019.
- £195,000 for complaints referred to us on or after 1 April 2024 about acts or omissions by firms before 1 April 2019.
- £190,000 for complaints referred to us between 1 April 2023 and 31 March 2024 about acts or omissions by firms before 1 April 2019.
- £170,000 for complaints referred to us between 1 April 2022 and 31 March 2023 about acts or omissions by firms before 1 April 2019.
- £160,000 for complaints referred to us between 1 April 2019 and 31 March 2022 about acts of omissions by firms before 1 April 2019.
For complaints referred to us before 1 April 2019, our previous award limit applies:
- £150,000 for any complaints referred to us before 1 April 2019.
How compensation is paid
Most of the time, we’ll tell the business to pay compensation directly to you.
But there may be exceptions. For example:
- if you owe money to the business, we might say it’s reasonable for it to offset any compensation against what you owe
- if you’re insolvent, we may say the business needs to pay the compensation from your complaint to the trustee or practitioner of your insolvency arrangement.
When we ask the business to add interest
We might decide the business should pay you interest:
- as part of financial compensation – for example, by refunding interest on your mortgage if you were paying a higher amount than you should have been, or
- because you were deprived of your money and didn’t have it available to use
The amount of interest will depend on the facts of the case. In complaints referred to us:
- from 1 January 2026, we typically ask financial businesses to calculate this using a time-weighted average of the Bank of England base rate plus one percentage point
- before 1 January 2026, we typically ask financial businesses to use a rate of interest at 8% simple a year.
If your case goes for a final decision after an investigator’s first assessment, one of our ombudsmen will review it.
They may say the financial business has to pay interest if it doesn't make the payment by a set deadline. This is usually 28 calendar days from the date we inform the financial business you have accepted the final decision. The interest rate for late payment is usually 8% simple a year.
If you were awarded interest for being deprived of money because the business delayed payment, that interest payment can be awarded on top of the limit.
Tax on compensation
In some cases, the law requires the business to deduct income tax at the basic rate from any compensation it pays you – whether or not you’re a taxpayer. But you may still have to pay tax on compensation, depending on:
- the type of compensation you’ve been awarded
- your financial position – any tax due will depend on your individual circumstances so, if you’re unsure what you need to pay, contact HM Revenue and Customs (HMRC).
If you’re being compensated for investment or pensions loss, the business won’t deduct capital gains tax for you. Talk to HMRC to determine what – if any tax – you need to pay and pay it through a self-assessment tax return.
If we say a business 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 tax deduction certificate. 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.
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You can usually claim back the tax the business has deducted for you. You’ll need to contact HMRC to do this.
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The business 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.
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You need to tell HMRC about your compensation so that it can be taxed correctly. You can declare the compensation to them or include it on a self-assessment tax return.
Going to court to get compensation
If you accept an award made in a final decision, it’s unlikely you’ll be able to take the business to court for more compensation later.
We can’t give you legal advice about this. If that’s something you’re considering, you will need to get independent legal advice before you accept any award.
There are time limits on taking a case to court, and these continue to run while we handle your case. Again, you should get independent legal advice if this is relevant to you.