If you are awarded personal injury compensation whether by a court ruling or by your employer’s insurance provider if they choose to settle out of court, the money you receive is not taxable. Government legislation rules that where personal injury compensation is concerned you do not have to pay tax on the amount awarded whether you receive a lump sum or interim payments should your case be such that it takes longer to receive a final settlement.
If you are seeking workplace injury compensation, a firm of solicitors who specialise in accident at work cases would offer an initial, no obligation consultation for which there would be no charge. The solicitor would also provide essential information on whether you may need to pay tax on any interest that accrues on the compensation you are awarded, to find out more, please read on.
Do I Have to Pay Tax on the Interest I Get on Personal Injury Payments?
When it comes to any tax that may be payable on the interest you receive on a personal injury payment, this is calculated and deducted at source. In short, any tax due would be deducted prior to a payment being made. An example being as follows:
- Should you have suffered an injury on January 1st, 2013 and you received a final settlement of £20,650 on July 14th, 2014 which included £650 interest on the £20,000 damages you received, there would be no tax to pay on the full £20,650. The reason being that the interest would already have been deducted at source and the £650 would have been the sum accrued between the date you were injured to the time you were awarded your final personal injury compensation settlement
However, there may be a further delay in receiving your compensation even if your personal injury claim is settled and an amount is agreed. Should this be the case, interest that may be added by the “payer” is subject to tax. The reason being that the interest is often paid without any tax having been deducted and as such, you would have to declare the “extra” interest when filing your annual tax return. An example being as follows:
- Should you have been awarded £20,650 on July 14th, 2014 but you did not receive your personal injury compensation until January 14th, 2015 an extra £206.50 would be added to your final settlement which is the amount accrued during the extra 6 months you had to wait. As such, it would be necessary to declare the sum of £206,50 on your tax return
Working with a solicitor when seeking accident at work compensation offers many benefits with one of them being that a lawyer who boasts vast experience in this type of case, would be able to advise you when it comes to any tax liabilities you may encounter on the “extra” interest that may accrue on the money you are awarded in a successful claim.
Investing Your Personal Injury Compensation and the Tax Liabilities
Should you decide to invest the amount of personal injury compensation you are awarded in a successful claim, the interest you receive on your investment would be taxable. If you are on the basic rate of tax, the amount of tax due is typically taxed at the source, but if you fill out a self-assessment return, you would need to declare the amount to HMRC yourself.
What Can Be Included in a Personal Injury Claim?
There are specific things which can be included in a personal injury claim which come under the titles of “general damages” and “special damages”. General damages are awarded based on the severity of your injuries and how your future life and well-being is impacted. Another factor that would be taken into consideration, is whether you would be able to work again or whether you need o have a lot of time off in order to recover.
Special damages, on the other hand are simpler to calculate as they are based on “actual” costs and expenses you had to pay out as a result of having been injured. When seeking personal injury compensation, it is essential that you are able to provide proof of the expenses you incurred in the form of receipts which would be required when calculating the “special damages” you receive in a successful claim. Without the necessary receipts, it would be hard to prove the expenses and other costs you incurred.
Is It Worth Suing an Employer For an Accident at Work Injury?
All employees are entitled to seek compensation for injuries sustained in the workplace, providing they can prove the incident occurred through no fault of their own. With this said, an employer could be held partly responsible for your injuries which is why it is always worth seeking legal advice from an experienced accident at work lawyer. There are various situations that a lawyer who specialises in personal injury claims would be able to investigate which includes “vicarious liability” and “contributory negligence”.
It is always worth remembering that employers throughout the UK are legally obliged to hold liability insurance and the policy must be current. The cover must also be provided by a “recognised” insurance provider. Failure to have the correct level of insurance in place would result in your employer receiving heavy fines from the enforcing authority.
With this said, the amount of tax free personal injury compensation you would be awarded is paid through your employer’s insurers whether they choose to settle out of court because your claim in undisputed, or they dispute your case and it goes to court.
Do I Have Workers Rights After an Accident at Work?
Your worker’s rights are protected even if you have an accident at work and would like to make a personal injury claim against your employer. These rights are as follows:
- To seek compensation for workplace injuries sustained or because you developed a work-related health issue
- Even if you seek compensation by filing a personal injury claim, your position and job within a business/company is secure
Should your employer try to prevent you from seeking compensation and threatens you with redundancy when they discover you are planning to file a case against them, you should seek legal advice from a lawyer and you should never resign because you feel under duress to do so without first speaking to a solicitor. Your employer’s behaviour towards you could entitle you to file further legal action out against them.
Does My Employer Have Legal Responsibilities in the Workplace?
Many laws exist in the UK that are set in place to ensure that employees and workers are kept as safe as possible while they are in employment. The Health and Safety Executive regulations must be adhered to not only by your employer, but all members of staff too. Should you suffer a workplace injury because your employer failed to keep you safe from harm and injury, you have the right to make a personal injury claim against them, providing your case meets specific criteria.
Employers have a duty to do the following:
- To make sure you and your work colleagues are given adequate and ongoing training to carry out jobs you are tasked to do in the workplace
- To regularly carry out risk assessments and to set in place all reasonable measures to reduce the risk of harm and injury to workers/employees
- To make sure that tools, equipment and other machinery is correctly maintained as per a manufacturers’ recommendations
- To make sure that all members of staff are made aware of working procedures and practices
- To make sure that all members of staff have access to personal protective equipment to carry out a job when needed
If an employer fails to provide any of the above or set in place necessary measures to keep employees safe from harm while they are working for them, they could be deemed liable for any injuries that you sustain in a workplace accident.
Are There Any Benefits to Working With a Solicitor on a Personal Injury Claim?
If you are considering filing a claim against an employer, you should seek legal advice from a solicitor who specialises in this type of work-related accident. A solicitor would ensure not only that you receive the right level of personal injury compensation, but that all aspects of the case which includes making you aware of any tax that may be due on the “extra” interest that has accrued from the time your case was won and an agreed sum was reached, to the time you actually received the compensation you sought.
Other benefits of having a solicitor represent you when making a personal injury claim against a negligent employer would include the following:
- Once your claim has been thoroughly investigated by a solicitor and they are satisfied you have a strong case against your employer, they would agree to represent you on a No Win No Fee basis
- A solicitor can use precedents to help prove your case by way of legal libraries to which they have access to
- A solicitor is experienced when it comes to negotiating a fair level of compensation for you with your employer’s liability insurance providers
- Should your case be complicated and your injuries be such that it could take you a long time to receive a final settlement, a solicitor would ensure you are paid interim payments in the meantime
- Specialist treatment and therapies can be organised for you which could help speed up your recovery and this includes physiotherapy
- A solicitor who specialises in accident at work claims would walk you through the process and would advise you on any tax liability you may have should your final settlement take longer than normal to be paid out and therefore the amount awarded accrued further interest
If you are claiming accident at work compensation from your employer because you believe the incident that left you injured could have been avoided, you should contact a lawyer who specialises in this type of work-related injury claim.
Is There a Time Limit to Claiming Accident at Work Compensation?
Following an accident at work in which you were injured, whether your injuries were minor or more severe, the statutory time limit associated with personal injury claims is detailed below:
- 3 years from the date of the workplace incident in which you were injured
- 3 years from the date you were officially diagnosed as suffering from a work-related medical condition
- 3 years from the date you turned 18 years of age, should the workplace accident have occurred prior to you being 18 years old
If you want to claim compensation for an accident at work injury, you should contact a lawyer sooner rather than later because it takes time to gather all the proof and evidence needed for your claim to be upheld. Waiting too long could result in you running out of time to claim accident at work compensation even if you have all the evidence required to prove your employer was negligent in their duty to keep you safe from injury in the workplace.
Can My Employer Fire Me For Claiming Accident at Work Compensation?
Your employer’s rights prevents an employer from sacking you because you are claiming accident at work compensation from them. An employer who threatens to fire you or to make you redundant for no other reason than because you are making a personal injury claim against them, would be acting illegally and as such, you would have the right to seek legal advice and to take out further legal action.
Would a Solicitor Work on a No Win No Fee Basis if I Seek Accident at Work Compensation?
As previously mentioned, once a solicitor who specialises in personal injury claims is satisfied that your claim is valid and that your case against a negligent employer is strong, they would offer to work with you without requesting an upfront payment in order to do so. You would be asked to sign a No Win No Fee agreement which is referred to as a Conditional Fee Agreement. This is a legally binding contract that is drawn up between you and the firm of solicitors. It lays out all the details relating to the Terms and Conditions of the contract and it also specifies the amount you would have to pay the solicitor which is known as a “success fee”.
The “success fee” is the percentage you agreed to pay for legal representation provided by a firm of lawyers but this only becomes payable when you are awarded the compensation you seek. The percentage is then deducted from the money you receive. Should you lose your claim, the “success fee” is waived because you entered into a No Win No Fee agreement with the firm of lawyers. In short, you only pay the solicitor once your case has been settled whether by a judge or through negotiations with your employer’s liability insurance providers.
The amount you are awarded is handled by the firm of solicitors who represented you and they would advise you on whether there is any tax to be paid on the interest that has accrued should the time it takes for you to receive a final settlement and the date your claim was settled, have taken longer. With this said, there would be no interest to be paid on the “actual” settlement you are awarded or the initial interest that may have accrued. The only time that interest would need to be included on a tax return, is when there is “extra” interest paid on the initial amount you receive in your accident at work compensation.
Informative Links
If you would like more in-depth information on tax liabilities on the personal injury compensation you may be awarded following an accident at work, the following link provides useful reading:
Further information regarding tax liabilities on personal injury compensation
To find out more about tax liabilities on personal injury compensation that you invest, the following link provides essential reading:
More information about investing your personal injury compensation and tax liabilities