Income Tax (Trading and Other Income) Act 2005 section 751

Interest on damages for personal injury

Section 751 provides an exemption from income tax for interest included in awards or settlements for personal injury or death, subject to certain conditions.

• Interest forming part of a court award for personal injury or death is exempt from income tax, provided it does not relate to the period between the making and satisfaction of the award
• Where the award is made by a court outside the United Kingdom, the interest must also be exempt from tax in that country for the UK exemption to apply
• The exemption extends to interest included in out-of-court settlements and payments into court, provided the interest would have qualified for exemption had it been part of a court award
• Personal injury is defined broadly to include disease and impairment of physical or mental condition, and in Scotland the term damages includes solatium