Is personal injury compensation taxable?
No — ITTOIA 2005 s.731; compensation for personal injury exempt from income tax; not subject to CGT; not classed as income for tax credit purposes
What about investment income on compensation held in trust?
Interest or investment income generated by compensation after receipt may be taxable; if held in a Personal Injury Trust — trustee tax position depends on structure; get financial advice for large settlements
What about state benefits received during the claim?
SSP is taxable income in the normal way; compensation for lost earnings replaces your net (after-tax) salary — not gross; CRU recovers certain state benefits paid
What about the success fee?
Success fee is deducted from compensation by your solicitor; you pay it from your compensation; it is not an additional tax
Related questions
Will HMRC take any of my work accident compensation?
No. Personal injury compensation is not subject to income tax or capital gains tax under ITTOIA 2005 s.731.
Does compensation affect my income for benefit purposes?
Capital from compensation can affect means-tested benefits — see our guide on compensation and benefits. Income tax is not charged on the compensation itself.
Can you claim? Find out in four quick steps.
Enquiries may be referred to SRA-regulated UK solicitor firms where appropriate. No win, no fee is subject to solicitor assessment of your individual case.
0800 000 0000Where did the accident happen?
Pick the setting closest to your situation.
Sources
- Income Tax (Trading and Other Income) Act 2005 s.731
- HMRC guidance — Personal injury payments
- Social Security (Recovery of Benefits) Act 1997
This answer is editorial information about UK law. It is not legal advice and does not create a solicitor–client relationship. For advice on your circumstances, speak to a regulated personal-injury solicitor.