Is flight delay compensation taxable?

What we looked for, and what we found

On 10 November 2026 we searched GOV.UK and HMRC’s published internal manuals for guidance on compensation paid under UK261 or EU261. We also checked the guides of the CAA, Citizens Advice, MoneySavingExpert and Which?. None of them addresses tax. The only discussion we found was on consumer forums, which is opinion, not guidance.

So we cannot tell you “HMRC says it is tax-free”, because HMRC has not said so. What we can do is set out what HMRC’s general rules say, so you can judge whether your case is straightforward.

It helps to be clear about what the money is. UK261 Article 7 gives a fixed sum per passenger – £220, £350 or £520 – for the inconvenience of a long delay, a cancellation or denied boarding. It does not depend on the ticket price or on any loss you suffered. It is separate from a refund of your ticket and from reimbursement of expenses.

Income Tax

Income Tax is charged on particular kinds of income. GOV.UK lists them: money you earn from employment, profits from self-employment, some state benefits, most pensions, rental income, benefits from your job, income from a trust, and interest on savings above your savings allowance.

Fixed compensation paid to a private passenger because a flight was late does not obviously fall into any of these categories: it is not pay, not trading profit, not rent and not interest. That is why many people assume it is not taxable – a reasonable reading of the general rules, but not a ruling from HMRC.

The position may be different if the payment is connected to a business or a job (see business trips below).

Capital Gains Tax

Capital Gains Tax can apply to “capital sums derived from assets”, and HMRC’s Capital Gains Manual discusses compensation in this context. Two points from the manual are relevant:

• Statutory rights. CG12995 says compensation may “in certain circumstances be treated as deriving from an asset consisting of the recipient’s statutory rights”, and that it is “essential to establish the facts”. It gives no example involving air passengers.
• Extra-statutory concession D33. CG13020 explains that by concession a gain on a right of action with no underlying asset – for example in private or domestic matters – is exempt up to £500,000. The manual also says the concession does not apply where the sum is derived from other assets, including statutory rights.

Even if a flight compensation payment were somehow treated as a capital gain, the amounts involved are small. GOV.UK gives the Capital Gains Tax annual tax-free allowance for individuals as £3,000. A single £520 payment, on its own, is well below that – although the allowance is shared with any other gains you make in the same tax year.

Interest awarded by a court

If you take an airline to court, you can usually claim interest – GOV.UK says the usual rate is 8% a year. Interest is treated differently from the compensation itself. HMRC’s manual SAIM2070 explains that where a court award includes interest for delay in payment, that element is generally treated as interest, while the label alone does not decide it. Only interest on damages for personal injury or death is exempt (SAIM2330).

In practice the interest on a flight claim is small – a few pounds to a few tens of pounds. Interest counts as savings income, and most people have a Personal Savings Allowance that covers a modest amount of interest each year (the amount depends on your Income Tax band). If your other savings interest already uses up your allowance, the court interest could be taxable.

Refunds and expenses are different

Alongside compensation, you may receive:

• a refund of the ticket price (Article 8) – money you spent being returned to you;
• reimbursement of expenses for meals, hotels and transport that the airline should have provided (Article 9).

These give back money you paid out. They are not profit. Keep them separate from the fixed compensation in your records.

Business trips

Compensation belongs to the passenger, even if an employer or client paid for the ticket. Tax questions are more likely to arise here:

• Employees: some employers ask staff to hand over compensation for business trips; others let them keep it. If your employer pays you an amount connected with your job, ask your payroll or HMRC how it should be treated.
• Self-employed people and company directors: if the trip was a business expense claimed against your profits, a payment received because of that trip may need to be considered in your business accounts. Ask your accountant.

We are not tax advisers, and these are situations where the answer depends on your facts.

Other countries

This page covers UK tax. If you are tax-resident elsewhere – for example in Ireland or another EU country – your national tax authority’s rules apply. We have not found official statements on flight compensation from other tax authorities either.

How to check your case

1. If you received only the fixed compensation for a personal trip and no interest, the general guidance above is likely to be what you need – but if you want certainty, ask HMRC.
2. If a court awarded interest, add it to your other savings interest for the tax year and check it against your Personal Savings Allowance.
3. If the trip was for work or your business, ask your employer, your accountant or HMRC.

If HMRC or another authority publishes specific guidance, we will update this page. If you know of official guidance we have missed, please tell us – see our editorial policy.

Frequently asked questions

Do I need to declare flight delay compensation on my tax return?

We found no HMRC guidance that specifically says so, and none that says it is exempt. For an ordinary passenger on a personal trip it does not fit any of the income categories GOV.UK lists as taxable. If you complete a Self Assessment return and are unsure, ask HMRC or a tax adviser.

Is the interest a court awards taxable?

Possibly. HMRC’s Savings and Investment Manual treats interest included in court awards as interest where it compensates for delay in payment (SAIM2070). Interest can count as savings income, which is taxable above your Personal Savings Allowance. Interest on damages for personal injury is exempt, but flight compensation is not a personal injury claim.

My employer paid for the ticket. Who gets the money?

Under the regulation, compensation belongs to the passenger. Whether your employer can ask you to pass it on, and how that is treated for tax, depends on your contract and company policy. Ask your employer and, if needed, HMRC.

Does a claim company deduct tax?

Claim companies deduct their fee (and VAT on the fee), not income tax. See claim companies compared.

Is a refund of my ticket taxable?

A refund gives you back money you spent; it is not a profit or income. Reimbursement of your expenses for meals or a hotel is similar. This is separate from the fixed compensation.

Sources

1. Income Tax: introduction (what is and is not taxable) – GOV.UK
2. SAIM2070 – Interest: lump sum receipts and compensation – HMRC
3. SAIM2330 – Interest: exemptions: personal injury damages – HMRC
4. CG12995 – Capital sums derived from assets: statutory rights – HMRC
5. CG13020 – Extra-statutory concession D33 – HMRC
6. Capital Gains Tax: allowances – GOV.UK
7. Tax on savings interest – GOV.UK
8. Make a court claim for money: interest – GOV.UK
9. Regulation (EC) No 261/2004 as it applies in the UK, Article 7 – legislation.gov.uk

We check every rule against the sources above. Spotted an error? Tell us – see our editorial policy.