Do you pay tax on personal injury claims?


Personal injury claims: Finance Questions and Answers

If you’ve been involved in an accident and are unable to work, it’s likely that you’ve got some questions about your finances. Below you’ll find answers to some commonly asked personal injury claim finance questions such as ‘do you pay tax on personal injury claims?’ and explore your rights if your employer was at fault.

Can I claim state benefits if my injury means I can’t work?

When you can’t go to work because of an accident, you are initially likely to receive Statutory Sick Pay from your employer. To receive this, you’ll have to show some evidence of your injuries such as a doctor’s note.

Statutory Sick Pay will cover you for two months but no more. If it’s agreed that your accident is due to an industrial accident, you’ll be able to claim Industrial Injuries Disablement Benefit by completing various forms at your local Jobcentre Plus or Social Security Office:

  • ‘Declaration of an accident at work’ Form B195
  • ‘Industrial Injuries Disablement Benefit for an accident at work’ Form BI100A.

You must claim no later than six months after the date of your accident.

You could also be entitled to other benefits. For further details, please visit the website.

Do you pay tax on personal injury claims?

Damages are always tax-free. Where the award is large and based on long-term future losses, speak to a financial advisor or your bank manager about how to invest the money to gain the highest rate of interest.

What if my employer was at fault?

An employer has a legal duty to insure against the risk of an unlawful accident to an employee. You should always take legal advice about starting a claim against your employer for direct/indirect negligence or a breach of duty under the Health and Safety laws.

If you win your claim, the damages you receive are likely to be much more than any industrial injuries benefits.

Your employer’s insurance company may deduct any state benefits you’ve received due to your accident and will refund them to the government. For more information about this read the Department of Work and Pension’s leaflet ‘Compensation and Social Security Benefits’ (GL27).

You may be worried about suing your employer in terms of returning to work and bullying. Rest assured that various laws are in place to protect your rights. Many employers accept that accidents and compensation claims happen and are covered by their insurance.

How do I start my claim?

Hopefully this Q&A answers your questions – particularly in relation to ‘do you pay tax on personal injury claims?’ and State benefit entitlement.

If you need more information, call Accident Advice Helpline on 0800 689 0500 today. We have friendly and professional advisers ready to take your call seven days a week, 24 hours a day.


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