Income Tax (Earnings and Pensions) Act 2003 section 641

Wounds and disability pensions

Section 641 exempts from income tax certain pensions and benefits paid to members of the armed forces, nursing services, and civilians in connection with wounds, disablement, or disability arising from military service.

• Wounds pensions, disabled officer retired pay, and disablement pensions paid to armed forces members and military nursing staff on account of medical unfitness caused or worsened by service are exempt from income tax.
• Injury or disablement pensions under War Risks Compensation Schemes for the Mercantile Marine and pensions under the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939 are also exempt.
• Benefits payable under the Armed Forces (Pensions and Compensation) Act 2004 for illness or injury — whether as a lump sum or following termination of service — are similarly tax-free.
• Where the Secretary of State certifies that only part of the pension or retired pay is attributable to disablement or disability, only that part is exempt from income tax.