If you are considering making a personal injury claim, you may be wondering, ‘Is compensation taxable?’. Within this guide, we explain whether you could be taxed for any compensation you are awarded. Additionally, we discuss whether any interest from this compensation could be subjected to tax.
We have also explained how our panel of expert solicitors could help you make a claim and answer your tax-related questions. You will also see information on the type of No Win No Fee contract they can offer their services under.
Contact our advisors today to discuss your personal injury compensation claim. You can also ask any questions you may have about the claiming process:
- Call the team on 020 8050 2736
- Complete our claim online form here.
- Open the live chat window at the bottom of your screen.
Browse Our Guide
- Is Compensation Taxable?
- Can You Be Taxed On Interest From A Personal Injury Claim?
- Can You Be Taxed After Investing Your Personal Injury Compensation?
- Contact Us To See If You Can Claim For A Personal Injury
- Read More About Personal Injury Claims
Is Compensation Taxable?
You may entitled to claim compensation after an accident if you can demonstrate a third party caused the accident by breaching the duty of care they owed you. These general eligibility criteria apply to accidents at work, on the roads and in public places.
A question you are no doubt asking when considering starting a personal injury claim is, “Is compensation taxable?” The answer is no. Whether you receive your compensation payment as a lump sum or in instalments, you do not pay tax on compensation payments. This covers a compensation award containing both general damages (for the injury suffered) and special damages (for your associated financial losses) are not subject to tax.
Tax, which is calculated on earnings and income (income tax), does not account for any money awarded in a compensation claim. In addition, the capital gains manual from HM Revenue and Customs (HMRC) states that Capital Gains Tax (CGT) is also not applicable to money awarded in compensation.
Contact our advisors today with any other questions you may have about personal injury compensation.
Can You Be Taxed On Interest From A Personal Injury Claim?
The money paid to you following a successful personal injury is comprised of two different parts:
- The actual settlement: This is the general and special damages sums paid for your physical and psychological injuries and the resulting financial losses, respectively.
- Interest: Any interest accrued from the time the accident occurred until the case is settled is applied to your compensation.
Since we have answered, ‘Is compensation taxable for a personal injury claim?’ you may also be wondering whether the interest on this compensation is also subject to tax.
Taxes will have already been paid by the defendant on the interest accrued on your settlement amount. You will, therefore, not be paying additional tax on any interest that is applied to your settlement.
Reach out to our advisors for more information on the personal injury claims process, as well to ask any questions about the information we’ve provided here.
Can You Be Taxed After Investing Your Personal Injury Compensation?
Another question you may be asking is, “Is compensation taxable after investing?” This really depends on how your money is invested. Certain bank accounts such as ISA’s are tax-free. However, you may be taxed on interest generated from other types of investments.
Sometimes, tax can be paid “at source,” meaning any relevant taxes have already been deducted before the interest is applied. Any earnings from investments, whether taxed or not, will need to be declared to HMRC.
The easiest way to check what tax you should be paying on compensation you have invested is to speak to your bank and ask them whether any taxes are due on your investments.
If you have any additional questions regarding personal injury compensation, you can contact our advisors.
Contact Us To See If You Can Claim For A Personal Injury
We work with a panel of highly experienced and knowledgeable personal injury solicitors to bring you the best possible standards of service and professionalism.
A solicitor could support you throughout the claims process, assisting with important tasks such as collecting evidence, communicating with the defendant’s solicitors and negotiating the maximum compensation settlement you could be entitled to.
The solicitors on our panel offer their services under a Conditional Fee Agreement (CFA), a type of No Win No Fee contract that offers some key benefits, including:
- No fees are payable to the solicitor to start work on your case.
- You will also not incur any fees for this work during the claim itself.
- Finally, as No Win No Fee would imply, you will not be paying any fee to the solicitor if the claim is lost.
A percentage of the awarded compensation will be taken as the solicitor’s success fee. Because a legal maximum is imposed on this percentage, you will keep the majority of any compensation that is paid out.
To ask “Is compensation taxable?”, or to find out if you could be eligible to make a claim, contact our advisors using the details given here:
- Call the team on 020 8050 2736
- Complete our claim online form here.
- Open the live chat window at the bottom of your screen.
Read More About Personal Injury Claims
More guides about personal injury claims:
- Learn more about taxi accident claims with this guide.
- Find out how to make a spinal injury at work claim.
- Learn about making a cinema accident compensation claim here.
We have also provided these external resources for further information:
- Learn more about getting compensation after an accident in this government resource.
- In this resource from the Financial Ombudsman you can learn more about taxation and compensation claims.
- You can find out more about interim payments in this government resource.
We’d like to thank you for reading this guide on the question, “Is compensation taxable?” To inquire further about compensation payouts or to check if you could claim in your particular circumstances, talk to our team today. Our advisors are available 24/7 using the contact details given above.
