Capital gains
Compensation, damages and insurance payouts: is there Capital Gains Tax?
Last updated 16 October 2026
Personal injury damages are free of Capital Gains Tax. Insurance or compensation for a damaged or lost asset is a disposal, unless you restore or replace it.
Whether a compensation payment brings Capital Gains Tax (CGT) depends on what it compensates. Damages for harm to you aren't a gain. Money for damage to, or loss of, something you own is treated as if you'd sold part or all of it.
Exempt: compensation for injury to you
Section 613 of the Taxes Consolidation Act 1997 covers compensation or damages for any wrong or injury an individual suffers. Where the wrong or injury is to them in person, or in their profession, the money is not a chargeable gain. That covers personal injury settlements and court awards, whatever the amount. Investing the money afterwards is a fresh start: later gains on those investments are taxed in the normal way.
Other gains that are exempt
Revenue's list of exemptions also includes:
- betting and lottery winnings, prize bonds and sweepstakes
- government stocks and certain life assurance policies
- animals, private cars, and moveable property such as furniture where the gain is €2,540 or less
Taxable: money for an asset
Under section 535, receiving a capital sum derived from an asset is a disposal of it, even though no one buys anything. That includes compensation for damage to or loss of an asset, insurance payouts for the same, and payments for giving up a right.
Relief if you restore or replace it
Section 536 lets you claim that there is no disposal when:
- the money is used in full to restore the damaged asset (or all but a small part that isn't needed)
- an asset is lost or destroyed and the money is used to buy a replacement within one year, or longer if Revenue allows
With a replacement, the gain isn't taxed now. It is taken off the cost of the new asset, so it is taxed when you eventually sell that.
An example
A painting bought for €15,000 in 2012 is stolen. The insurer pays its current value, €40,000, in November 2026.
| Insurance payout | €40,000.00 |
| Less what it cost | (€15,000.00) |
| Gain | €25,000.00 |
| CGT if the painting isn't replaced | €7,356.30 |
| CGT now if €40,000 or more buys a replacement within a year | €0.00 |
If the replacement costs €45,000, its cost for CGT becomes €45,000 less the €25,000 gain. If only part of the money is reinvested, the relief is restricted and some of the gain is taxed now.
Reporting
A taxable payout is reported like a sale, on Form 11 or Form CG1. The CGT is due by 15 December (or 31 January for December). Claim the section 536 relief on the same return. See CGT deadlines.
Work it out
Sources
- Revenue: How to calculate CGT (checked 25/10/2026)
- Revenue: When and how do you pay and file CGT? (checked 25/10/2026)
- Revenue: Tax and Duty Manual Part 02-03-01A: Capital Gains Tax rate of charge (S.28) (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.