You don’t have to pay tax
on personal injury compensation payments.
But for any interest that is added to the compensation payment you receive, the tax rules are different.
• Personal injury claims can take many months (or years) to settle. So most compensation payments will have interest added
(usually at the rate of 8% in Northern Ireland).
• Interest paid to you for the period between the date the accident happened and the date your case is settled is not taxable
• But – if there is a delay between the date your case is settled and the date you receive your payment, and interest is paid to you for that delay, that interest will be taxable
Your solicitor (or accountant) will help you work this out and make sure you comply with the rules.
Let’s look at benefits next.