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TOPIC: incapcity benifit

Re:incapcity benifit 7 years 3 months ago #42105

Just wanted to clarify a point from my previous post.

With regard to the tax free element of your current claim, my understanding is that this issue has still not been resolved, however, for the first time yesterday, I saw an unofficial document suggesting that the tax free status will be lost on transfer to ESA.

ESA(CB) is liable to tax whereas ESA(IR) is not. Quite how this will playout for pre 1995 IB claimants, has yet to be seen.

Gordon

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Re:incapcity benifit 7 years 3 months ago #42107

  • originaldave
Gordon wrote:

Just wanted to clarify a point from my previous post.

With regard to the tax free element of your current claim, my understanding is that this issue has still not been resolved, however, for the first time yesterday, I saw an unofficial document suggesting that the tax free status will be lost on transfer to ESA.

ESA(CB) is liable to tax whereas ESA(IR) is not. Quite how this will playout for pre 1995 IB claimants, has yet to be seen.

Gordon


can of worms pre 95 have you seen my thread asking and pointing out the problems once and if tax exempt is removed as that will have a big affect on tax credits too it will reduce the amount you get IMO

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Re:incapcity benifit 7 years 3 months ago #42118

Dave wrote:

Gordon wrote:

Just wanted to clarify a point from my previous post.

With regard to the tax free element of your current claim, my understanding is that this issue has still not been resolved, however, for the first time yesterday, I saw an unofficial document suggesting that the tax free status will be lost on transfer to ESA.

ESA(CB) is liable to tax whereas ESA(IR) is not. Quite how this will playout for pre 1995 IB claimants, has yet to be seen.

Gordon


can of worms pre 95 have you seen my thread asking and pointing out the problems once and if tax exempt is removed as that will have a big affect on tax credits too it will reduce the amount you get IMO


Scroll down on this link where it states that Claimants who are eligible for ESA will, on conversion, be taxed in the same way as existing claimants on ESA.

I am assuming that means pre 1995 inc/ben tax exempt existing claimants.

Hope i am wrong because this affects me.

www.ssac.org.uk/pdf/employment_and_support_allowance_regs.pdf

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Re:incapcity benifit 7 years 3 months ago #42122

headinawheelchair

It was always assumed that the majority of transferees would be taxed in the same way as existing ESA claimants, however, the jury was still out with regard to the pre '95s.

The documents you have linked to seems to confirm that a decision is pending, and as you suspect, 95ers will become liable for tax.

6.16 Subject to HMT agreement, on conversion to contributory ESA from IB, it is planned customers will be liable to income tax on their ESA in the same way as new contributory ESA customers. This will include those customers who have previously received IB with no tax liability, such as former Invalidity Benefit and Sickness Benefit customers.

Thanks for the link :(

Gordon

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Re:incapcity benifit 7 years 3 months ago #42126

  • originaldave
Gordon wrote:

headinawheelchair

It was always assumed that the majority of transferees would be taxed in the same way as existing ESA claimants, however, the jury was still out with regard to the pre '95s.

The documents you have linked to seems to confirm that a decision is pending, and as you suspect, 95ers will become liable for tax.

6.16 Subject to HMT agreement, on conversion to contributory ESA from IB, it is planned customers will be liable to income tax on their ESA in the same way as new contributory ESA customers. This will include those customers who have previously received IB with no tax liability, such as former Invalidity Benefit and Sickness Benefit customers.

Thanks for the link :(

Gordon


So as I posted in other threads onces its taxable your income has says the taxman gone up and your tax credits could well go down because of that.

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Re:incapcity benifit 7 years 3 months ago #42127

So as I posted in other threads onces its taxable your income has says the taxman gone up and your tax credits could well go down because of that.[/quote]

Yep i also pointed this out in a previous post with the following.

Got it from the Low Incomes Tax Reform Groups site

News- Long term sick to become much poorer
'Employment and support allowance (ESA) was introduced in October 2008 and from that date no new claims to incapacity benefit (IB) have been allowed.
There are two types of ESA – the non-taxable ‘income-based’ and the taxable ‘contribution-based’. As the names suggest, claimants qualify for the former if they are on very low incomes, but qualification for the latter is based upon claimants’ employment history and resulting National Insurance contributions record.
Proposed changes
People who have been on IB since April 1995 or before – former invalidity benefit claimants – will lose out in the amount of cash they have in their pockets. Hitherto, they have received IB tax-free. Now, this ‘transitional protection’ given at the time of the switch in 1995 to IB is to be discontinued.
The people affected are likely to be among those with the most permanent and difficult disabilities.
The complex impact on former invalidity benefit claimants
A simple switch from tax-free IB to taxable ESA is itself significant, giving many in the affected group a 20% reduction in their benefit to the extent that it exceeds their personal allowances for tax; but even more worrying is the impact on the tax credits claim of the household.
The tax-free IB is currently excluded from the income calculation for tax credits. But when it is replaced by taxable ESA, under current tax credit rules, the benefit will be included in the calculation, and that could result in tax credits being taken away at the rate of 39p in the £.
Moreover, ‘passported benefits’ – such as help with housing, council tax, healthcare costs and prescription charges – could be lost. So overall, an additional tax liability coupled with reduced tax credits and other benefits could leave the household dramatically worse off.'

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