Tax On Personal Injury Compensation Payments
If you get a personal injury compensation payment, the last thing you want to get is a tax bill.
While compensation payments are almost always exempt from tax, there are some exceptions that you should be aware of.
Disclaimer: This guide outlines general topics you should be thinking about if you want to make a personal injury claim. But it is not legal advice. If you need legal advice, you should contact a specialist personal injury claim solicitor for guidance on your specific circumstances.
Do I Have To Pay Tax On My Personal Injury Compensation Payment?
No – personal injury compensation payments are non-taxable. But you may owe tax on a portion of the any interest payments you receive. Interest paid for delays between the date your case settled and the date you get your compensation can be subject to tax.
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.
The above article is part of our guide on how to make a personal injury claim in Northern Ireland.
If you are thinking about making a personal injury claim, you should get in touch with a Northern Ireland personal injury solicitor who will help you assess the strength of your case.
If you have any questions, you are very welcome to get in touch.
All the best,
The Team @ Lightlaw
Every effort is made to keep this guide up to date. Although it is not to be regarded as legal advice, we strive to make sure the information is helpful, accurate and practical. If you are a Northern Ireland personal injury solicitor and have spotted an inaccuracy, you can submit a suggested change.