ESA and paying Tax

I was medically retired in 1990 and received my work pension and Invalidity benefit, which changed to Incapacity benefit, and now to ESA. I got it before it was taxable. Now they have moved the goalposts and ESA is taxable for everybody. I have suddenly been landed with a tax bill for TWO years, having not paid any tax for years. I now have to find £2k to pay the tax man. I live on a disability pension and ESA. That was a big shock to me. I just wanted to warn others in this situation that it will be happening to you this year, if you received ICB/IVB before 1996 I think it is.

Daffers wrote: I was medically retired in 1990 and received my work pension and Invalidity benefit, which changed to Incapacity benefit, and now to ESA. I got it before it was taxable. Now they have moved the goalposts and ESA is taxable for everybody. I have suddenly been landed with a tax bill for TWO years, having not paid any tax for years. I now have to find £2k to pay the tax man. I live on a disability pension and ESA. That was a big shock to me. I just wanted to warn others in this situation that it will be happening to you this year, if you received ICB/IVB before 1996 I think it is.

Hi D,

Thanks for "the heads up" on this.

Yes, unfortunately Contribution Based (CB) ESA is classed as Taxable Income, along with any other Taxable Income that you may be in receipt of, such as a Works Pension :

My IB was tax exempt; will it still be under ESA?

From our :

IB, IS, SDA, Migration to ESA FAQ’s

Cheers

bro58

Hi

I was in the same boat a couple of years back and was sent a tax bill for nearly £3000!!! covering 2 tax years, like you daffers in shock, however i fought it under the ESC A19 rule. whereby if my memory serves me right the HMRC have to inform you annually if there has been any underpayment and they cannot go back years, also the DWP inform the tax office immediately when your benefit changes from say IB to ESA which they also know ESA is a taxable benefit and they would see you were receiving your works pension,although their get out phrase is "it is our own responsibility to inform HMRC of our own personal circumstances" i got a template letter off the internet referring to ESC A19 (Extra Statutory Concession A19 allows HMRC to not collect certain liabilities in respect of underpaid income tax and capital gains tax) and it was quite a simple; i have copied a template letter below if the dear mods will allow, obviously you complete with your own name, address, NI number, Reference, tax years etc and taylor it to your own personal circumstances, send to your HMRC office, I did, it took about 6 - 8 weeks for them to respond by letter, but they wiped off the debt!!!!!!!, and I have just done it for my hubby who was exactly in the same situation as you ref pension and transfer from IB To ESA Although his demand was only!! £320, again won and debt wiped off, it's worth a try, I also rang them and advised them what i was planning to do and sent my letter by signed for royal mail service.

Hope this helps
Good Luck
Best Wishes
Sweetheart xx


[Your own name]

[Your NI no]

[Any other HMRC reference shown on the P800]

I have received your tax calculation for the tax year [quote that which

applies to you - 2008/09, 2009/10 or '2008/09 and 2009/10'].

The calculation suggests that I have underpaid tax for [quote the year or
years]. I was unaware that my tax affairs were not in order. I had thought that all the tax that I was due to pay was deducted under PAYE. I believe that the underpayment has arisen because you failed to take action upon relevant information already in your possession for the year in question.

For the tax year 2009/10, I appreciate that you are not notifying me of the arrears more than 12 months after the end of the tax year in which you received the information indicating that more tax was due. However I feel that the 'exceptional circumstances' condition applies because you:

• failed more than once to make proper use of the facts you had been given about my sources of income

• allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information that you had been given.

I am therefore requesting that under the provisions of ESC A19 that the whole

of the underpayment as shown on the P800 should be remitted.