Income Tax (Earnings and Pensions) Act 2003 section 638

Awards for bravery

Section 638 exempts from income tax any pension or annuity paid to the holder of a specified award for bravery in respect of that award.

• Pensions and annuities paid in respect of qualifying bravery awards are completely exempt from income tax.
• The exemption applies only to the holder of the award — it does not extend to dependants or other recipients.
• Eleven specific military and civilian gallantry decorations are listed as qualifying awards, including the Victoria Cross and the George Cross.
• The exemption covers only payments made in respect of the award itself; other pension income received by the holder remains taxable in the normal way.