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HMRC internal manual

Employment Income Manual

Employment income: financial loss allowances

Section 62 ITEPA 2003

Financial loss allowance, sometimes called a payment for loss of earnings, is paid to members of various public bodies such as those in the National Health Service. Such payments are also made to magistrates and persons on jury service.

Provided that the payment is calculated to do no more than replace the salary that the recipient would otherwise have received from their employer, a financial loss allowance is not taxable as employment income. However, if the recipient is self-employed the allowance is taxable as Trading Income as a receipt of the business. See also BIM40475.