Leaving the armed forces as a result of disablement
This section considers the tax position of various payments that may be made to you as a result of you leaving the armed forces because of disablement.
Is the position the same if I am disabled as a result of active service or if I am disabled for some other reason?
No, the two situations are different. You may also be paid different benefits and allowances. You can check the tax status of any payment received from the armed forces in our section ‘How pay is taxed’. Our section on ‘Tax credits and benefits’ provides information on state benefits you may receive.
What is the tax position of any payments I receive as a result of leaving the armed forces because of a disability that resulted from active service?
Any payments you receive from the Armed Forces Compensation Scheme (or its predecessor schemes the War Pension Scheme or Armed Forces Attributable Benefits scheme) are not taxable. This includes any pensions received for wounds received. You can read more about this on the page ‘Pensions paid on leaving the armed forces’.
Is my position different if I was in the Gurkhas?
There are various different conditions to be satisfied. Any payments you receive under the Armed Forces Compensation Scheme (broadly for injuries caused or severely aggravated by service after 6 April 2005) are tax-free. If your injury was sustained before that, you should read the relevant sections in the Gurkhas Pension Scheme booklet.
What is the Armed Forces Independence Payment (AFIP)?
This is a tax-free payment made to both service personnel and veterans who are seriously injured as a result of their service. It is paid by the Department for Work and Pensions (DWP) and is instead of receiving a Personal Independence Payment (PIP), Disability Living Allowance (DLA) or Attendance Allowance (AA). You can read more about the benefit on GOV.UK. Our section on ’Tax credits and benefits’ also provides some information on its interaction with other state benefits.
Where can I get further help and information?
You can read more about some of the help disabled people can get in our section on ‘Disabled people and carers’. In particular, you may be eligible for a grant under the Access to Work scheme that is designed to support disabled people and people with health or mental health conditions to start working or stay in work, including self-employment.
If you employ a carer, you may find our Disability Tax Guide helpful.
You should receive help from the Defence Recovery Capability that aims to coordinate support to wounded, injured and sick service personnel.
You can find out more about resettlement provisions and training on GOV.UK where there is a special section for those who are medically discharged.