A refund of the interest and charges you paid isn’t taxable: it’s your own money coming back.
The 8% simple interest added on top is treated as savings interest. Lenders usually take off basic-rate income tax (20%) from that part before paying you, and should give you a certificate showing how much was deducted if you ask.
Can I get the tax back?
Often, yes. If you don’t pay income tax, or the interest falls within your Personal Savings Allowance, you can usually claim it back from HMRC, for example with form R40. See GOV.UK: claim back tax on savings interest.
Does it affect benefits?
A refund can count as capital for means-tested benefits once you’ve received it. If you get Universal Credit or other benefits, check with the benefits office or a free adviser such as Citizens Advice.