Insurance Pay Out And Benefits

[hurkleho]

Hi, my parents had their house destroyed in the recent floods and have just received an initial pay out of £21,000. Will this affect their pension and will it have to be declared? Many thanks

[Buenchico]

Pensions are unaffected by any other income. Your parents could win a record Euromillions jackpot and simultaneously have Bill Gates hand over all future Microsoft profits to them and still not see their pensions affected.

Income from insurance receipts is only taxable if the money it replaces would itself have been taxable. (e.g. if a business received an insurance payout for loss of profits after a flood, that payout would be counted as part of the firm's taxable income). The money your parents have already received, and any further insurance payout they may yet to receive, isn't replacing any taxable income, therefore it doesn't have to be declared as taxable income.

[hurkleho]

Many thanks, buenchico!

[hc4361]

It could affect pension credit, though. That is means tested but I don’t know how this payment is treated.