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Insurance payouts - taxable? tax credit implications?

(5 Posts)
towardsZero Mon 04-Jul-11 18:20:17

Hi,

Are there any tax or tax credit implications to getting a lump sum insurance payout?

DH was injured while on a motorbike completely the other drivers fault. His insurance came with legal representation attached so all he had to do was hand his details over and they have done the rest.

The payout to cover some of our costs but mainly because he has suffered long term damage which will impact him later in life and almost certainly mean future operations.

The money will dig us out of multiple holes with the house - so would like to know how much of the final payout we'll get. So will we lose some of it with tax? Also the tax credits - we get just over 40 a week which is alot to us - will these be adversely affected? If there implications will tax and tax credit people get in touch or will have to inform them?

blushingm Mon 04-Jul-11 18:21:08

it's not income - it's compensation

cremeeggsbenedict Mon 04-Jul-11 18:22:59

I was under the impression that anything that covered lost earnings was taxable, but anything that was compensation wasn't. I dealt with an insolvency case where the guy paid tax on his lost earnings part of his payout and that element was also claimable for the estate.

CogitoErgoSometimes Mon 04-Jul-11 18:26:42

Insurance claims are classed as non-taxable income so anything you receive will not affect your tax credit award.

•compensation or damages awarded for personal injuries whether received in one lump sum or over a period and whether awarded by a court or out of court settlement

How much of the final payout you get depends on the terms of the policy. The excess for example.

towardsZero Mon 04-Jul-11 18:46:17

Thank you - that what were thinking but I didn't want to have a nasty surprise.

Lost earning are not a huge part - he took all the holiday he had, which was above the national average and company let him take up front, then while he was unable to walk still and still very ill worked from home to meet work deadlines angry- he may have had two weeks statuary sick pay as well in there. They were trying to get something for him having no holiday time for 12 months - which was extremely awkward for us as a family - haven't seen the break down yet so do not know if they had any luck.

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