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What Benefits Are Taxable?

Lots of us are struggling for cash right now. Many of us have found ourselves losing our jobs, homes and even our loved ones. The country does have a benefits system that helps people out if they hit hard times. You might not be in receipt of any benefits but you never know when you might be. There's a wide range of benefits including Carer's Allowance and Incapacity Benefit. With times harder than ever for some of us, it's worth knowing what benefits are taxable and which ones aren't. 

What Benefits Are Taxable

Taxable State Benefits

Even if you're not currently receiving state benefits, it's worth having an idea about what benefits are taxable and which ones aren't. It's probably more important knowing which are taxable as you need to plan for those taxes. If you are in receipt of benefits, you might not even realise there is tax associated with the benefits you're receiving. Here are some of the 

Carer’s Allowance

Carer's allowance is the first state benefit we're going to talk about that is taxable. This is for people who give substantial care to disabled people, regularly. You'll need to be over the age of 16, not in full time education and looking after someone for at least 35 hours a week. The person you care for will have to be in receipt of certain benefits and in order to get the Carer's allowance, you'll not be able to earn more than £128 a week from employment or self employed work. This is after tax and national insurance deductions. As carer's allowance is taxable it forms part of your taxable income. 

Employment & Support Allowance (ESA)

Employment & Support Allowance (ESA) has two sides to it. In come related ESA is not taxable. However contribution based ESA is, do you may have to pay on on that. this would depend on whether you receive any other income, or an occupational pension. it could be down to your circumstances whether or not you have to pay tax. ESA has incorporated a few other benefits you may have heard of previously, including incapacity benefit

Jobseeker’s Allowance (JSA)

Unlike the above, Jobseeker's Allowance (JSA) is taxable, whether income or contribution based. Many of us are currently on this after a wave of job losses during the pandemic. So this is well worth knowing that what you receive in benefits here is indeed taxable. There are rules which determine just how much of the JSA received is taxable. If you are out of work right now, be sure to get signed onto JSA.

The State Pension

Your state pension is taxable. However, you receive it gross, meaning that no tax is taken at source. If the total amount of taxable income, including your pension from the state is higher than allowances, you will have to pay tax on the amount over the allowance. If you defer your state pension, you won't pay any tax on it. different pensions are treated differently and tax may be collected in different ways, including from PAYE.

What Benefits Are Taxable

Tax Free Benefits

Of course, there are benefits which are not taxable. A couple of these are listed below and we've discussed one or two of them in more detail.

Bereavement Support Payment

You may not have heard of bereavement support payment, or BSP as it's referred to. It's replaced Bereavement Allowance which was previously called Widow's Pension, Bereavement Payment and Widowed Parent's Allowance. If you husband, wife or civil partner has died in the last 21 months, you may be able to get Bereavement Support Payment. In order to get the full amount you must claim within 3 months of your partner's death. You can claim at any point up to 21 months after their death, however you'll receive fever payments. BSP gives you an initial payment of £2500 (£3500 if you have children) followed by 10 monthly payments of £100. This monthly figure could be £350 if you're eligible for Child Benefit. It is not taxable.

Maternity Allowance

If you don't qualify for Statutory Maternity Pay, you should be able to claim Maternity Allowance. This can be claimed from when you are 26 weeks pregnant and these payments can begin from 11 weeks before your due date. The amount that you'll get will depend on your eligibility. The amount you'll receive will be £151.20 a week or 90% of your average weekly earnings (whichever is less). This is paid for 39 weeks. You might instead get £27 a week for 39 weeks, or £27 a week for 14 weeks. It is paid fortnightly or every four weeks and is no taxable.

Universal Credit

You may have heard a lot about Universal Credit and it's great to know that this is not a taxable benefit. It is a means tested benefit which can be paid in order to help people with the cost of living expenses. You may receive it if you are on a low income, out of work or you cannot work. There have been more people claiming Universal Credit since the Covid 19 pandemic began. Those out of work or unable to claim furlough or SEISS payments tend to only have Universal Credit to fall back on. Universal Credit is replacing Child Tax Credit, Housing Benefit, Income Support and some other benefits. 

Other tax free benefits include Winter Fuel Payments, Personal Independence Payment (PIP), Housing Benefit and Disability Living Allowance (DLA). You can take a look at the full list over on the government website

Claim What You're Due

Be sure you are always claiming the benefits you are entitled to. You may think that after years of working you are above claiming benefits, but you've paid your tax into the pot for all those years. So many of us miss out on benefit we should be in receipt of. It's worth knowing what benefits are taxable and free from tax if our situations change or if you're currently in receipt of benefits. It's better to be able to live comfortably and claim the benefits you can, as you might find yourself struggling and unable to back date that claim. Whatever benefits you are receiving, are looking to claim, or maybe even helping a loved one with, be sure you know the tax side of things.

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