ESA and income tax payable (support group)

[Becca7]

Just been migrated. The amount is to cover both IS  and IB payments and mentions the contribution based part being taxable. I have a breakdown of the amount (v confusing!) How does it work? Im in support group and it is more than i got before but is a single payment not separate. Do i get a tax bill at the end of the year?

[Pyrotech]

You should in theory get a basic form of the P60 at then end of the year as IB and ESA are taxable benefits... DLA and Industrial injuries benefits are not...

Very handy if you have a small amount of savings , you can get the interest paid tax free.   You won't get a tax bill, as your entitled to the same tax fre allowances as everybody else. 

[Monic1511]

Becca
the tax rates are
Income Tax allowances             2010-11          2011-12              2012-13
Personal Allowance (1)             Â£6,475            £7,475                 Â£8,105

http://www.hmrc.gov.uk/rates/it.htm

So this year you'd need a weekly taxable income of more than £143.75 before you'd pay any tax.
Monic

[hossylass]

Becca you wont get a tax bill.

Unless you are a secret millionaire, your only taxable income is the ESA, so you are fine.

[Becca7]

My ESA payment is £178.05 per week.

[Sofie]

Does that include the enhanced disability premium? Which is based on income, I think. I seem to remember that the only people whose ESA is taxable, are those who receive a pension on top.

[Becca7]

Um dont know. Its broken down to include 'extra money because disabled' and 'disability income guarantee' letter clearly says they have informed HMRC my income has increased to £178.05. Also my council only allows for the 71 for lha so am v worried about this. It didnt matter on IS/IB. They dont recognise ESA or IB alone. This is too much to get lha (i earnt less working and got turned down).

[Sofie]

Extra money because disabled, I seem to remember is based on income.

[Becca7]

But the letter says its contribution *and* income based. The dwp guide says it cant be both *confused*.

[hossylass]

Ah thats because you are entitled to the contribution based, but because you have no savings or a partner you would also be entitled on an income tested basis.
When the contributions based ends after a year you will still be be entitled but on an income related basis.

Its an underlying entitlement that doesn't come into effect at the moment because you have enough contibutions, but they feel the need to tell you this.

[Sofie]

Becca's in the support group; so the one year limit doesn't apply.

[Becca7]

Hm. So they are out to confuse me more. Brilliant. Just what i need. So does that mean the bit that is contribution based (the basic rate) is taxable and all the extras are income based are not? And why would dwp add them and tell HMRC that figure not the relevant one only? Cos i know how they (dont think and) work. See weekly number *not broken down* lump together tax 'em.

[hossylass]

Sofie, forgot about that !

Duh me!
I'm being a bit thick tonight, so I'll come back to this tomorrow. ;)

[Sofie]

Income based benefits aren't taxable; the contributions based benefits are. But only if your income (not because you're on a low income income) is more than £8105 per year. If you're just on ESA, tax won't apply.

[Monic1511]

Becca
your taxable income will be the contribution based ESA £71.00 a week = 3692 per year so as that is less than £8105 you won't pay tax, the extra money you get is premiums and are income related therefore not taxable.  Every year benefit claimants get a P60 letter from the DWP that gives your taxable income, it looks like an ordinary letter so is often mislaid.
try not to stress  >hugs<
Monic