Income Tax (Trading and Other Income) Act 2005 section 731

Periodical payments of personal injury damages

Section 731 provides an exemption from income tax for periodical payments and annuities received as compensation for personal injury.

• Regular payments made under court orders, settlement agreements, or Motor Insurers' Bureau undertakings in respect of personal injury damages are exempt from income tax for the persons specified in section 733.
• The exemption also covers annuity payments purchased or provided by the party responsible for making the periodical payments, where the annuity is set up in accordance with the relevant court order, agreement, or undertaking.
• Personal injury is defined broadly to include disease and impairment of physical or mental condition, and damages for personal injury include damages for death resulting from personal injury.
• A Motor Insurers' Bureau undertaking means a commitment given by the Motor Insurers' Bureau itself (incorporated on 14th June 1946) or by an Article 75 insurer under the Bureau's Articles of Association.