Tax on repayment

A question about : Tax on repayment

I recently received a payment from NatWest for a mis-sold packaged bank account. The claims company I used charged me 8% on top of their fees and said it was taken on behalf of HMRC.
I understand the 8% interest is taxable...but they took the entire 8%.
Also, how do they know my tax status and how much I owe.
I think NatWest may have already deduced the tax.
Anyone else had this issue?
Thanks

Best answers:

• 1) You pay tax at 20% on interest (just like non-ISA savings account) - it's only on the interest element though, not the refund of fees.
  2) It doesn't matter, they do it automatically to save you getting a huge bill from HMRC for not declaring it yourself. If a higher rate taxpayer you have to declare this and pay full tax.
  3) If you are a non-taxpayer you can claim it back in the usual way. You will have to query with the bank to see if the deducted tax at source - if so you can ask the claims company for that money back
• Thanks for the input.....although you say it doesn't matter what my tax status is, I don't live in the UK. I live in Switzerland and pay tax here....and there is a Double Taxation Agreement with the UK. But they never bothered to ask about that.
  Surely if I did live in the UK...it would be included on my Self-Assessment or I would get my Tax-Code adjusted.
  It seems rediculous that they take 8% that's 100% of the interest?