Tax on Personal Injury Compensation?

foxypink

Hi,

I'm due to receive compensation for an injury caused in a car accident and was wondering if anyone knows if I would have to pay tax on the lump sum? I've tried google but cant seem to find an answer and it's going to be playing on my mind all night.

Thanks in advance

agrinnall

This page on the CAB website seems to suggest that non-taxable income includes:

compensation or damages awarded for personal injuries whether received in one lump sum or over a period and whether awarded by a court or out of court settlement

However, compensation was not mentioned as either taxable or non-taxable in HMRC's list of income sources, so it may be worth ringing them to check before doing anything.

foxypink

thanks for your help

missile

I can confirm no tax is due on compensation payment for personal injury claim.

Bad luck on your injury and good luck in getting compensation.

jimmo

In the vast majority of cases personal injury compensation is not taxable but it is possible that the compensation is taxable if you were working at the time of the accident.

The following links are to the HMRC instruction manuals and you should bear in mind they are more designed to look for ways to tax something than to look for ways to find that something isn’t taxable.

If you are employed

http://www.hmrc.gov.uk/manuals/eimanual/EIM06450.htm

If you are self-employed.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM40105.htm