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HMRC internal manual

Employment Income Manual

The taxation of pension income: Pensions: particular occupations: armed forces: awards for bravery

Section 638 ITEPA 2003

Section 638 provides that no liability to income tax arises on a pension or annuity if it is paid to the holder of a specified award for bravery in respect of the award. The specified awards are -

  • the Victoria Cross
  • the George Cross
  • the Albert Medal
  • the Edward Medal
  • the Military Cross
  • the Distinguished Flying Cross
  • the Distinguished Conduct Medal
  • the Conspicuous Gallantry Medal
  • the Distinguished Service Medal
  • the Military Medal
  • the Distinguished Flying Medal

This exemption only relates to the additional annuity or pension paid to a recipient of one of the above awards in respect of that award. For example, a retired soldier is in receipt of an Armed Forces pension of £15,000 and also receives an additional amount of pension in respect of holding a specified award for bravery. The £15,000 Armed Forces pension is not covered by the exemption at section 638 and is taxed in the normal way.